STURM, RUGER & COMPANY, INC. · Sturm, Ruger & Company, Inc. (the “Company”) is principally engaged in the design, manufacture, and sale of firearms to domestic customers. Approximately

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTION 13 OR 15(d) THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ___________

Commission File Number 0-4776

STURM, RUGER & COMPANY, INC. (Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)

06-0633559 (I.R.S. Employer

Identification No.)

Lacey Place, Southport, Connecticut (Address of Principal Executive Offices)

06890 (Zip Code)

(203) 259-7843 (Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Common Stock, $1 par value

Name of Each Exchange on Which Registered

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES NO Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES NO Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act

of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject

to such filing requirements for the past 90 days. YES NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be

contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form

10-K or any amendment to this Form 10-K [ ].

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of

“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-

accelerated filer [ ] Smaller reporting company [ ].

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YES NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every

Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)

during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES NO

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the

price at which the common equity was last sold, or the average bid and asked price of such common equity, as of June 30, 2012:

Common Stock, $1 par value - $743,661,000

The number of shares outstanding of the registrant's common stock as of February 15, 2013:

Common Stock, $1 par value –19,263,000 shares

DOCUMENTS INCORPORATED BY REFERENCE.

Portions of the registrant’s Proxy Statement relating to the 2013 Annual Meeting of Stockholders to be held April 30, 2013 are incorporated by

reference into Part III (Items 10 through 14) of this Report.

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TABLE OF CONTENTS PART I

Item 1. Business.…………………………………..………………………………………………………….. 4

Item 1A. Risk Factors…………………………………………………………………………………………… 10

Item 1B. Unresolved Staff Comments………………………………………………………………………….. 13

Item 2. Properties.…………………………………………………………………………………………….. 13

Item 3. Legal Proceedings....………………………………………………………………………………….. 14

Item 4. Mine Safety Disclosures………………………………………………................................................. 14

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities.……………………………………………………………………...

14

Item 6. Selected Financial Data………………………………………………………………………………. 18

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations………… 19

Item 7A. Quantitative and Qualitative Disclosures About Market Risk………………………………………... 41

Item 8. Financial Statements and Supplementary Data………………………………………………………. 42

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ………. 70

Item 9A. Controls and Procedures.……………………………………………………………………………... 70

Item 9B. Other Information.……………………………………………………………………………………. 71

PART III

Item 10. Directors, Executive Officers and Corporate Governance……………………………………………. 72

Item 11. Executive Compensation.……………………………………………………………………………... 72

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters.……………………………………………………………………………………………...

72

Item 13. Certain Relationships and Related Transactions, and Director Independence……………………….. 72

Item 14. Principal Accountant Fees and Services….…………………………………………………………... 72

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PART IV

Item 15. Exhibits and Financial Statement Schedules..………………………………………………………... 73

Signature.…… ………………………………………………………………………………………………………… 78

Exhibit Index.. ………………………………………………………………………………………………………… 79

Financial Statement Schedule... ……………………………………………………………………………………….. 84

Exhibits……... ……………………………………………………………………………………………………….... 86

EXPLANATORY NOTE:

In this Annual Report on Form 10-K, Sturm, Ruger & Company, Inc. (the “Company”) makes forward-looking

statements and projections concerning future expectations. Such statements are based on current expectations and are

subject to certain qualifying risks and uncertainties, such as market demand, sales levels of firearms, anticipated

castings sales and earnings, the need for external financing for operations or capital expenditures, the results of

pending litigation against the Company, the impact of future firearms control and environmental legislation, and

accounting estimates, any one or more of which could cause actual results to differ materially from those projected.

Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could” and other words and

terms of similar meaning, typically identify such forward-looking statements. Readers are cautioned not to place

undue reliance on these forward-looking statements, which speak only as of the date made. The Company undertakes

no obligation to publish revised forward-looking statements to reflect events or circumstances after the date such

forward-looking statements are made or to reflect the occurrence of subsequent unanticipated events.

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PART I ITEM 1—BUSINESS Company Overview

Sturm, Ruger & Company, Inc. (the “Company”) is principally engaged in the design,

manufacture, and sale of firearms to domestic customers. Approximately 99% of the Company’s

total sales for the year ended December 31, 2012 were from the firearms segment, and

approximately 1% was from investment castings. Export sales represent approximately 3% of

firearms sales. The Company’s design and manufacturing operations are located in the United

States and almost all product content is domestic.

The Company has been in business since 1949 and was incorporated in its present form under the

laws of Delaware in 1969. The Company offers products in three industry product categories –

rifles, pistols, and revolvers. The Company’s firearms are sold through independent wholesale

distributors, principally to the commercial sporting market.

The Company manufactures and sells investment castings made from steel alloys for both outside

customers and internal use in the firearms segment. Investment castings sold to outside

customers, either directly to or through manufacturers’ representatives, represented approximately

1% of the Company’s total sales for the year ended December 31, 2012. For the years ended December 31, 2012, 2011, and 2010, net sales attributable to the Company's

firearms operations were approximately $484.9 million, $324.2 million and $251.7 million or

approximately 99%, 99%, and 99%, respectively, of total net sales. The balance of the

Company's net sales for the aforementioned periods was attributable to its investment castings

operations.

Firearms Products

The Company presently manufactures firearm products, under the “Ruger” name and trademark,

in the following industry categories: Rifles Revolvers

Single-shot Single-action Autoloading Double-action Bolt-action Modern sporting

Pistols

Rimfire autoloading Centerfire autoloading

Most firearms are available in several models based upon caliber, finish, barrel length, and other

features.

Rifles

A rifle is a long gun with spiral grooves cut into the interior of the barrel to give the bullet a

stabilizing spin after it leaves the barrel. Sales of rifles by the Company accounted for

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approximately $143.9 million, $83.4 million, and $63.5 million of revenues for the years 2012,

2011, and 2010, respectively.

Pistols

A pistol is a handgun in which the ammunition chamber is an integral part of the barrel and which

typically is fed ammunition from a magazine contained in the grip. Sales of pistols by the

Company accounted for approximately $216.5 million, $150.0 million, and $108.1 million of

revenues for the years 2012, 2011, and 2010, respectively.

Revolvers

A revolver is a handgun that has a cylinder that holds the ammunition in a series of chambers

which are successively aligned with the barrel of the gun during each firing cycle. There are two

general types of revolvers, single-action and double-action. To fire a single-action revolver, the

hammer is pulled back to cock the gun and align the cylinder before the trigger is pulled. To fire

a double-action revolver, a single trigger pull advances the cylinder and cocks and releases the

hammer. Sales of revolvers by the Company accounted for approximately $92.7 million, $69.9

million, and $67.1 million of revenues for the years 2012, 2011, and 2010, respectively.

Accessories

The Company also manufactures and sells accessories and replacement parts for its firearms.

These sales accounted for approximately $31.8 million, $20.2 million, and $11.5 million of

revenues for the years 2012, 2011, and 2010, respectively.

Investment Casting Products

Net sales attributable to the Company’s investment casting operations (excluding intercompany

transactions) accounted for approximately $6.9 million, $4.6 million, and $3.5 million, or

approximately 1% of revenues for 2012, 2011, and 2010, respectively.

Manufacturing

Firearms

The Company produces one model of pistol and all of its rifles and revolvers at the Newport, New

Hampshire facility. All other pistols are produced at the Prescott, Arizona facility.

Many of the basic metal component parts of the firearms manufactured by the Company are

produced by the Company's castings facility through a process known as precision investment

casting. See "Manufacturing-Investment Castings" for a description of the investment casting

process. The Company initiated the use of this process in the production of component parts for

firearms in 1953. The Company believes that the investment casting process provides greater

design flexibility and results in component parts which are generally close to their ultimate shape

and, therefore, require less machining than processes requiring machining a solid billet of metal to

obtain a part. Through the use of investment castings, the Company endeavors to produce durable

and less costly component parts for its firearms.

All assembly, inspection, and testing of firearms manufactured by the Company are performed at

the Company's manufacturing facilities. Every firearm, including every chamber of every

revolver manufactured by the Company, is test-fired prior to shipment.

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Investment Castings

To produce a product by the investment casting method, a wax model of the part is created and

coated (“invested”) with several layers of ceramic material. The shell is then heated to melt the

interior wax, which is poured off, leaving a hollow mold. To cast the desired part, molten metal is

poured into the mold and allowed to cool and solidify. The mold is then broken off to reveal a

near net shape cast metal part.

Marketing and Distribution

Firearms

The Company's firearms are primarily marketed through a network of federally licensed,

independent wholesale distributors who purchase the products directly from the Company. They

resell to federally licensed, independent retail firearms dealers who in turn resell to legally

authorized end users. All retail purchasers are subject to a point-of-sale background check by law

enforcement. These end users include sportsmen, hunters, people interested in self-defense, law

enforcement and other governmental organizations, and gun collectors. Each distributor carries

the entire line of firearms manufactured by the Company for the commercial market. Currently,

14 distributors service the domestic commercial market, with an additional 20 distributors

servicing the domestic law enforcement market and two distributors servicing the Canadian

market.

In 2012, the Company’s largest customers and the percent of total sales they represented were as

follows: Davidson’s-17%; Jerry’s/Ellett Brothers-14%; Lipsey’s-13%; and Sports South-12%. In

2011, the Company’s largest customers and the percent of total sales they represented were as

follows: Jerry’s/Ellett Brothers-15%; Davidson’s-14%; Sports South-12%; and Lipsey’s-12%. In

2010, the Company’s largest customers and the percent of total sales they represented were as

follows: Jerry’s/Ellett Brothers-16%; Davidson’s-12%; Lipsey’s-11%; and Sports South-11%.

The Company employs nine employees and one independent contractor who service these

distributors and call on retailers and law enforcement agencies. Because the ultimate demand for

the Company's firearms comes from end users rather than from the independent wholesale

distributors, the Company believes that the loss of any distributor would not have a material,

long-term adverse effect on the Company, but may have a material adverse effect on the

Company’s financial results for a particular period. The Company considers its relationships with

its distributors to be satisfactory.

The Company also exports its firearms through a network of selected commercial distributors and

directly to certain foreign customers, consisting primarily of law enforcement agencies and

foreign governments. Foreign sales were less than 6% of the Company's consolidated net sales

for each of the past three fiscal years.

The Company does not consider its overall firearms business to be predictably seasonal; however,

orders of many models of firearms from the distributors tend to be stronger in the first quarter of

the year and weaker in the third quarter of the year. This is due in part to the timing of the

distributor show season, which occurs during the first quarter.

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Investment Castings

The investment castings segment provides castings for the Company’s firearms segment. In

addition, the investment castings segment produces various products for a number of customers in

a variety of industries, including approximately 20 firearms and firearms component

manufacturers.

Competition

Firearms

Competition in the firearms industry is intense and comes from both foreign and domestic

manufacturers. While some of these competitors concentrate on a single industry product

category such as rifles or pistols, several competitors manufacture products in all four industry

categories (rifles, shotguns, pistols, and revolvers). Some of these competitors are subsidiaries of

larger corporations than the Company with substantially greater financial resources than the

Company, which could affect the Company’s ability to compete. The principal methods of

competition in the industry are product innovation, quality, availability, and price. The Company

believes that it can compete effectively with all of its present competitors.

Investment Castings

There are a large number of investment castings manufacturers, both domestic and foreign, with

which the Company competes. Competition varies based on the type of investment castings

products and the end use of the product (commercial, sporting goods, or military). Companies

offering alternative methods of manufacturing such as metal injection molding (MIM), wire

electric discharge machining (EDM) and advancements in computer numeric controlled (CNC)

machining also compete with the Company’s investment castings segment. Many of these

competitors are larger corporations than the Company with substantially greater financial

resources than the Company, which could affect the Company’s ability to compete with these

competitors. The principal methods of competition in the industry are quality, price, and

production lead time.

Employees

As of February 1, 2013, the Company employed approximately 1,460 full-time employees of

which approximately 38% had at least ten years of service with the Company. The Company uses

temporary employees to supplement its workforce. As of February 1, 2013, there were

approximately 580 temporary employees.

None of the Company's employees are subject to a collective bargaining agreement.

Research and Development

In 2012, 2011, and 2010, the Company spent approximately $5.9 million, $4.0 million, and $3.2

million, respectively, on research activities relating to the development of new products and the

improvement of existing products. As of February 1, 2013, the Company had approximately 89

employees whose primary responsibilities were research and development activities.

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Patents and Trademarks

The Company owns various United States and foreign patents and trademarks which have been

secured over a period of years and which expire at various times. It is the policy of the Company

to apply for patents and trademarks whenever new products or processes deemed commercially

valuable are developed or marketed by the Company. However, none of these patents and

trademarks are considered to be fundamental to any important product or manufacturing process

of the Company and, although the Company deems its patents and trademarks to be of value, it

does not consider its business materially dependent on patent or trademark protection.

Environmental Matters

The Company is committed to achieving high standards of environmental quality and product

safety, and strives to provide a safe and healthy workplace for its employees and others in the

communities in which it operates. The Company has programs in place that monitor compliance

with various environmental regulations. However, in the normal course of its manufacturing

operations the Company is subject to governmental proceedings and orders pertaining to waste

disposal, air emissions, and water discharges into the environment. These regulations are

integrated into the Company’s manufacturing, assembly, and testing processes. The Company

believes that it is generally in compliance with applicable environmental regulations and that the

outcome of any environmental proceedings and orders will not have a material adverse effect on

the financial position of the Company, but could have a material adverse effect on the financial

results for a particular period.

Executive Officers of the Company

Set forth below are the names, ages, and positions of the executive officers of the Company.

Officers serve at the discretion of the Board of Directors of the Company. Name Age Position With Company Michael O. Fifer

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President and Chief Executive Officer

Thomas A. Dineen 44 Vice President, Treasurer and Chief Financial Officer Christopher J. Killoy 54 Vice President of Sales and Marketing Mark T. Lang 56 Group Vice President Thomas P. Sullivan 52 Vice President of Newport Operations Kevin B. Reid, Sr. 52 Vice President and General Counsel Steven M. Maynard 58 Vice President of Lean Business Development Leslie M. Gasper 59 Corporate Secretary

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Michael O. Fifer joined the Company as Chief Executive Officer on September 25, 2006, and was

named to the Board of Directors on October 19, 2006. Mr. Fifer was named President on April

23, 2008.

Thomas A. Dineen became Vice President on May 24, 2006. Previously he served as Treasurer

and Chief Financial Officer since May 6, 2003 and had been Assistant Controller since 2001.

Prior to that, Mr. Dineen had served as Manager, Corporate Accounting since 1997.

Christopher J. Killoy rejoined the Company as Vice President of Sales and Marketing on

November 27, 2006. Mr. Killoy originally joined the Company in 2003 as Executive Director of

Sales and Marketing, and subsequently served as Vice President of Sales and Marketing from

November 1, 2004 to January 25, 2005.

Mark T. Lang joined the Company as Group Vice President on February 18, 2008. Mr. Lang is

responsible for management of the Prescott Firearms Division and the Company’s acquisition

efforts. Prior to joining the Company, Mr. Lang was President of the Custom Products Business

at Mueller Industries, Inc. Prior to joining Mueller, Mr. Lang was the Vice President of

Operations for the Automotive Division of Thomas and Betts, Inc.

Thomas P. Sullivan joined the Company as Vice President of Newport Operations for the

Newport, New Hampshire Firearms and Pine Tree Castings divisions on August 14, 2006.

Kevin B. Reid, Sr. became Vice President and General Counsel on April 23, 2008. Previously he

served as the Company’s Director of Marketing from June 4, 2007. Mr. Reid joined the Company

in July 2001 as an Assistant General Counsel.

Steven M. Maynard joined the Company as Vice President of Lean Business Development on

April 24, 2007. Prior to joining the Company, Mr. Maynard served as Vice President of

Engineering and CIO at the Wiremold Company.

Leslie M. Gasper has been Secretary of the Company since 1994. Prior to that, Ms. Gasper was

the Administrator of the Company’s pension plans.

Where You Can Find More Information

The Company is subject to the informational requirements of the Securities and Exchange Act of

1934, as amended (the "Exchange Act"), and accordingly files its Annual Report on Form 10-K,

Quarterly Reports on Form 10-Q, Definitive Proxy Statements, Current Reports on Form 8-K, and

other information with the Securities and Exchange Commission (the "SEC"). The public may

read and copy any materials filed with the SEC at the SEC's Public Reference Room at 100 F

Street NE, Washington, DC 20549. Please call the SEC at (800) SEC-0330 for further

information on the Public Reference Room. As an electronic filer, the Company's public filings

are maintained on the SEC's Internet site that contains reports, proxy and information statements,

and other information regarding issuers that file electronically with the SEC. The address of that

website is http://www.sec.gov.

The Company files its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Definitive

Proxy Statements, Current Reports on Form 8-K and amendments to those reports filed or

furnished pursuant to Section 13(a) or 15(d) of the Exchange Act accessible free of charge

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through the Company's Internet site after the Company has electronically filed such material with,

or furnished it to, the SEC. The address of that website is http://www.ruger.com. However, such

reports may not be accessible through the Company's website as promptly as they are accessible

on the SEC’s website.

Additionally, the Company’s corporate governance materials, including its Corporate Governance

Guidelines, the charters of the Audit, Compensation, and Nominating and Corporate Governance

committees, and the Code of Business Conduct and Ethics may also be found under the

“Stockholder Relations” section of the Company’s Internet site at http://www.ruger.com. A copy

of the foregoing corporate governance materials is available upon written request to the Corporate

Secretary at Sturm, Ruger & Company, Inc., Lacey Place, Southport, Connecticut 06890. ITEM 1A—RISK FACTORS

The Company’s operations could be affected by various risks, many of which are beyond its

control. Based on current information, the Company believes that the following identifies the

most significant risk factors that could adversely affect its business. Past financial performance

may not be a reliable indicator of future performance and historical trends should not be used to

anticipate results or trends in future periods.

In evaluating the Company’s business, the following risk factors, as well as other information in

this report, should be carefully considered.

Changes in government policies and firearms legislation could adversely affect the

Company’s financial results.

The sale, purchase, ownership, and use of firearms are subject to thousands of federal, state and

local governmental regulations. The basic federal laws are the National Firearms Act, the Federal

Firearms Act, and the Gun Control Act of 1968. These laws generally prohibit the private

ownership of fully automatic weapons and place certain restrictions on the interstate sale of

firearms unless certain licenses are obtained. The Company does not manufacture fully automatic

weapons and holds all necessary licenses under these federal laws. Several states currently have

laws in effect similar to the aforementioned legislation.

Until November 30, 1998, the “Brady Law” mandated a nationwide five-day waiting period and

background check prior to the purchase of a handgun. As of November 30, 1998, the National

Instant Check System, which applies to both handguns and long guns, replaced the five-day

waiting period. The Company believes that the “Brady Law” and the National Instant Check

System have not had a significant effect on the Company’s sales of firearms, nor does it anticipate

any significant impact on sales in the future. On September 13, 1994, the “Violent Crime Control

and Law Enforcement Act” banned so-called “assault weapons.” All the Company’s then-

manufactured commercially-sold long guns were exempted by name as “legitimate sporting

firearms.” This ban expired by operation of law on September 13, 2004. The Company remains

strongly opposed to laws which would restrict the rights of law-abiding citizens to lawfully

acquire firearms.

Currently, federal and several states’ legislatures are considering additional legislation relating to

the regulation of firearms. These proposed bills are extremely varied, but many seek either to

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restrict or ban the sale and, in some cases, the ownership of various types of firearms. There also

are several legislative proposals to limit magazine capacity.

The Company believes that the lawful private ownership of firearms is guaranteed by the Second

Amendment to the United States Constitution and that the widespread private ownership of

firearms in the United States will continue. However, there can be no assurance that the

regulation of firearms will not become more restrictive in the future and that any such restriction

would not have a material adverse effect on the business of the Company.

The Company’s results of operations could be further adversely affected if legislation with

diverse requirements is enacted.

With literally thousands of laws being proposed at the federal, state and local levels, if even a

small percentage of these laws are enacted and they are incongruent, the Company could find it

difficult, expensive or even practically impossible to comply with them, impeding new product

development and distribution of existing products.

The Company’s results of operations could be adversely affected by litigation.

The Company faces risks arising from various asserted and unasserted litigation matters. These

matters include, but are not limited to, assertions of allegedly defective product design or

manufacture, alleged failure to warn, purported class actions against firearms manufacturers,

generally seeking relief such as medical expense reimbursement, property damages, and punitive

damages arising from accidents involving firearms or the criminal misuse of firearms, and those

lawsuits filed on behalf of municipalities alleging harm to the general public. Various factors or

developments can lead to changes in current estimates of liabilities such as final adverse

judgment, significant settlement or changes in applicable law. A future adverse outcome in any

one or more of these matters could have a material adverse effect on the Company’s financial

results. See Note 16 to the financial statements which are included in this Annual Report on

Form 10-K.

The Company’s results of operations could be adversely affected by a decrease in demand

for our products.

If demand for our products decreases significantly, we would be unable to efficiently utilize our

capacity, and our profitability would suffer. Decreased demand could result from a

macroeconomic downturn, such as sequestration, or could be specific to the firearms industry. If

the decrease in demand occurs abruptly, the adverse impact would be even greater.

The Company must comply with various laws and regulations pertaining to workplace

safety and environment, environmental matters, and firearms manufacture.

In the normal course of its manufacturing operations, the Company is subject to numerous

federal, state and local laws and governmental regulations and related state laws, and

governmental proceedings and orders. These laws and regulations pertain to workplace safety and

environment, firearms serial number tracking and control, waste disposal, air emissions and water

discharges into the environment. Noncompliance with any one or more of these laws and

regulations could have a material adverse impact on the Company.

Business disruptions at one of the Company’s manufacturing facilities could adversely affect

the Company’s financial results.

The Newport, New Hampshire and Prescott, Arizona facilities are critical to the Company’s

success. These facilities house the Company’s principal production, research, development,

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engineering, design, and shipping operations. Any event that causes a disruption of the operation

of either of these facilities for even a relatively short period of time could have a material adverse

effect on the Company’s ability to produce and ship products and to provide service to its

customers.

Price increases for raw materials could adversely affect the Company’s financial results.

Third parties supply the Company with various raw materials for its firearms and castings, such as

fabricated steel components, walnut, birch, beech, maple and laminated lumber for rifle stocks,

wax, ceramic material, metal alloys, various synthetic products and other component parts. There

is a limited supply of these materials in the marketplace at any given time, which can cause the

purchase prices to vary based upon numerous market factors. The Company believes that it has

adequate quantities of raw materials in inventory or on order to provide ample time to locate and

obtain additional items at then-current market cost without interruption of its manufacturing

operations. However, if market conditions result in a significant prolonged inflation of certain

prices or if adequate quantities of raw materials can not be obtained, the Company’s

manufacturing processes could be interrupted and the Company’s financial condition or results of

operations could be materially adversely affected.

The transition to a new enterprise resource planning (“ERP”) system could cause disruption

to the Company’s operations.

The Company is transitioning to a new ERP system and has converted all of its manufacturing

facilities and its support functions during the past two years. If the ERP system does not perform

as expected, it could impede the Company’s ability to manufacture products, order materials,

generate management reports, invoice customers, and comply with laws and regulations. Any of

these types of disruptions could have a material adverse effect on the financial position and the

financial results of the Company.

Retention of key management is critical to the success of the Company.

We rely on the management and leadership skills of our senior management team. Our senior

executives are not bound by employment agreements. The loss of the services of one or more of

our senior executives or other key personnel could have a significant adverse impact on our

business.

The healthcare legislation passed in 2010 could have a material adverse impact on the

Company. Certain provisions of the recently passed federal healthcare legislation, in particular the

“unlimited lifetime benefit” which eliminated the practice of capping the amount of medical

benefits available to an individual, could have a material adverse effect on the Company’s

financial position. The Company self insures the cost of the medical benefits for its employees up

to an annual and lifetime maximum per individual. It supplements this self-insurance with “stop

loss” insurance for costs incurred above these maximum thresholds. In the past, the medical

benefit costs for several Company employees each year have exceeded this maximum, in some

cases significantly. It is the Company’s expectation that if it is forced to provide an “unlimited

lifetime benefit” its medical costs would likely increase significantly, which would have a

material adverse effect on its financial condition.

Keeping Pace with Retail Demand There has been a substantial increase in demand for our products in recent years. If the Company

continues to grow at a significant rate, additional manufacturing space will be required. If we are

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unable to keep pace with the increasing demand for our products, our revenues could be impaired,

market acceptance of our products could be adversely affected and our customers might instead

purchase our competitors’ products.

ITEM 1B—UNRESOLVED STAFF COMMENTS None. ITEM 2—PROPERTIES The Company’s manufacturing operations are carried out at two facilities. The following table sets forth certain information regarding each of these facilities:

Approximate Aggregate

Usable Square Feet

Status

Segment

Newport, New Hampshire 350,000 Owned Firearms/Castings Prescott, Arizona 230,000 Leased Firearms

Each facility contains enclosed ranges for testing firearms and also contains modern tool room facilities. The lease of the Prescott facility provides for rental payments, which are approximately equivalent to estimated rates for real property taxes. The Company has three other facilities that were not used in its manufacturing operations in 2012:

Approximate Aggregate

Usable Square Feet

Status

Segment

Southport, Connecticut (Lacey Place property)

25,000 Owned Corporate

Newport, New Hampshire (Dorr Woolen Building)

45,000

Owned

Firearms

Enfield, Connecticut 10,000 Leased Firearms There are no mortgages or any other major encumbrance on any of the real estate owned by the Company. The Company’s principal executive offices are located in Southport, Connecticut. If the

Company continues to grow at a significant rate, additional manufacturing space will be required.

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ITEM 3—LEGAL PROCEEDINGS

The nature of the legal proceedings against the Company is discussed at Note 16 to the financial

statements, which are included in this Annual Report on Form 10-K.

The Company has reported all cases instituted against it through September 29, 2012, and the

results of those cases, where terminated, to the SEC on its previous Quarterly Reports on Form

10-Q and Annual Reports on 10-K, to which reference is hereby made.

During the three months ending December 31, 2012, no cases were formally instituted against the

Company.

During the three months ending December 31, 2012, the previously reported case of Howard

Cook, Jr. vs. Sturm, Ruger & Co, et al., was dismissed, with prejudice.

ITEM 4—MINE SAFETY DISCLOSURES – NOT APPLICABLE PART II ITEM 5—MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED

STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock is traded on the New York Stock Exchange under the symbol

“RGR.” At February 1, 2013, the Company had 1,773 stockholders of record.

The following table sets forth, for the periods indicated, the high and low sales prices for the

Company’s common stock as reported on the New York Stock Exchange and dividends paid on

the Company’s common stock.

High

Low

Dividends Per Share

2011: First Quarter $23.23 $14.65 $0.050 Second Quarter 24.05 18.65 0.097 Third Quarter 36.85 21.91 0.142 Fourth Quarter 34.95 23.86 0.141 2012: First Quarter $50.72 $33.13 $0.212 Second Quarter 58.42 34.22 0.324 Third Quarter 52.03 39.13 0.377 Fourth Quarter 60.11 40.00 4.882

15

Issuer Repurchase of Equity Securities

In 2012, the Company did not repurchase any shares of its common stock.

In 2011, the Company repurchased 133,400 shares of its common stock, representing 0.7% of the

then outstanding shares, in the open market at an average price of $14.94 per share.

In 2010, the Company repurchased 412,000 shares of its common stock, representing 2.1% of the

then outstanding shares, in the open market at an average price of $13.83 per share.

16

Comparison of Five-Year Cumulative Total Return* Sturm, Ruger & Co., Inc., Standard & Poor’s 500, Value Line Recreation Index, and Smith & Wesson Holding Corporation

(Performance Results Through 12/31/12)

Assumes $100 invested at the close of trading 12/07 in Sturm, Ruger & Co., Inc. common stock, Standard & Poor’s 500, Value Line Recreation Index, and Smith & Wesson Holding Corporation.

*Cumulative total return assumes reinvestment of dividends.

Source: Value Line Publishing LLC

Factual material is obtained from sources believed to be reliable, but the publisher is not responsible for any errors or omissions contained herein.

2007 2008 2009 2010 2011 2012 Sturm, Ruger & Co., Inc. 100.00 72.10 120.36 193.94 431.60 602.12 Standard & Poor’s 500 100.00 63.00 79.67 91.67 93.60 108.58

Value Line Recreation Index 100.00 63.20 103.45 155.21 143.04 192.00 Smith & Wesson Holding

Corporation 100.00 37.21 67.05 61.31 71.48 138.36

$100.00 $72.10

$120.36

$193.94

$431.60

$602.12

$63.00

$79.67 $91.67 $93.60

$108.58

$63.20

$103.45

$155.21 $143.04

$192.00

$37.21

$67.05 $61.31 $71.48

$138.36

$0

$100

$200

$300

$400

$500

$600

$700

2007 2008 2009 2010 2011 2012

Sturm, Ruger & Co., Inc.

Standard & Poors 500

Recreation

Smith & Wesson Holding

17

Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information regarding compensation plans under which equity securities of the Company are authorized for issuance as of December 31, 2012:

Equity Compensation Plan Information

Plan category

Number of securities to

be issued upon exercise of

outstanding options,

warrants and rights

(a)

Weighted-average

exercise price of

outstanding options,

warrants and rights

(b) *

Number of securities

remaining available for

future issuance under

equity compensation

plans (excluding

securities reflected in

column (a))

(c)

Equity compensation

plans approved by

security holders

2001 Stock Option Plan for

Non-Employee Directors 12,880 $6.15 per share -

2007 Stock Incentive Plan 107,580 $8.87 per share 830,000

Equity compensation

plans not approved by

security holders

None.

Total 120,460 $8.58 per share 830,000

* Restricted stock units are settled in shares of common stock on a one-for-one basis.

Accordingly, such units have been excluded for purposes of computing the weighted-

average exercise price.

18

ITEM 6—SELECTED FINANCIAL DATA

(Dollars in thousands, except per share data) December 31,

2012 2011 2010 2009 2008

Net firearms sales $484,933 $324,200 $251,680 $266,566 $174,416 Net castings sales 6,891 4,616 3,526 4,419 7,067

Total net sales 491,824 328,816 255,206 270,985 181,483

Cost of products sold 312,871 217,058 171,224 183,380 138,730 Gross profit 178,953 111,758 83,982 87,605 42,753 Income before income taxes 112,109 63,516 44,149 44,360 13,978

Income taxes 41,480 23,501 15,894 16,857 5,312

Net income 70,629 40,015 28,255 27,503 8,666

Basic earnings per share 3.69 2.12 1.48 1.44 0.43

Diluted earnings per share 3.60 2.09 1.46 1.42 0.43

Cash dividends per share $ 5.80 $ 0.43 $ 0.33 $ 0.31 $ 0.00

December 31,

2012 2011 2010 2009 2008

Working capital $ 37,430 $ 96,646 $ 71,885 $65,377 $ 46,250 Total assets 174,486 206,510 157,761 141,679 112,760 Total stockholders’ equity 95,032 137,391 114,480 95,516 65,603 Book value per share $ 4.93 $ 7.20 $ 6.08 $5.01 $ 3.44 Return on stockholders’ equity 60.8% 32.0% 26.9% 34.1% 12.2% Current ratio 1.6 to 1 3.0 to 1 3.2 to 1 3.0 to 1 2.6 to 1 Common shares outstanding 19,263,000 19,083,100 18,837,300 19,072,800 19,047,300 Number of stockholders of record 1,771 1,860 1,841 1,827 1,841 Number of employees 1,441 1,224 1,164 1,145 1,145

19

ITEM 7—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Company Overview



total sales for 2012 were firearms sales, and 1% was investment castings sales. Export sales

represent approximately 3% of total sales. The Company’s design and manufacturing operations

are located in the United States and almost all product content is domestic. The Company’s

firearms are sold through a select number of independent wholesale distributors, principally to the

commercial sporting market.

The Company also manufactures investment castings made from steel alloys for internal use in its

firearms and for sale to unaffiliated, third-party customers.

Orders of many models of firearms from the independent distributors tend to be stronger in the

first quarter of the year and weaker in the third quarter of the year. This is due in part to the

timing of the distributor show season, which occurs during the first quarter.

Results of Operations - 2012

Product Demand

Demand for the Company’s products remained very strong throughout 2012. We believe this

strong demand for our products was due to:

the Company’s continued practice of introducing innovative and exciting new products,

new shooters joining the ranks of gun owners, and

the current political environment that favorably impacted the entire firearms industry, and

increased manufacturing capacity and greater product availability for certain products in

strong demand.

New product introductions in 2012 included the 10/22 TakeDown rifle, the Ruger American

Rifle, the SR22 pistol, the 22/45 Lite pistol, and the Single-Nine revolver. New products

represented $182.0 million or 38% of firearm sales in 2012, compared to $98.6 million or 30% of

firearms sales in 2011.

The estimated sell-through of the Company’s products from the independent distributors to

retailers increased 63% in 2012 from the comparable prior year periods. For the same periods, the

National Instant Criminal Background Check System (“NICS”) background checks (as adjusted

by the National Shooting Sports Foundation) increased 28%.

20

Estimated sell-through from distributors to retailers and total NICS background checks follow:

2012 2011 2010

Estimated Units Sold from Distributors to

Retailers (1)

1,772,800

1,085,200

901,500

Total Adjusted NICS Background Checks (2) 13,780,000 10,791,000 9,436,000

(1) The estimates for each period were calculated by taking the beginning inventory at

the distributors, plus shipments from the Company to distributors during the

period, less the ending inventory at distributors. These estimates are only a proxy

for actual market demand as they:

Rely on data provided by independent distributors that are not verified by

the Company,

Do not consider potential timing issues within the distribution channel,

including goods-in-transit, and

Do not consider fluctuations in inventory at retail.

(2) While NICS background checks are not a precise measure of retail activity, they

are commonly used as a proxy for retail demand. NICS background checks are

performed when the ownership of most firearms, either new or used, is transferred

by a Federal Firearms Licensee. NICS background checks are also performed for

permit applications, permit renewals, and other administrative reasons.

The adjusted NICS data presented above was derived by the National Shooting

Sports Foundation (“NSSF”) by subtracting out NICS checks that are not directly

related to the sale of a firearm, including checks used for concealed carry (“CCW”)

permit application checks as well as checks on active CCW permit databases.

While not a direct correlation to firearms sales, the NSSF-adjusted NICS data

provides a more accurate picture of current market conditions than raw NICS data.

Orders Received and Ending Backlog

(in millions except average sales price, net of Federal Excise Tax):

2012 2011 2010

Orders Received $796.7 $385.9 $229.4

Average Sales Price of Orders Received $277 $278 $272

Ending Backlog $427.1 $98.2 $34.9

Average Sales Price of Ending Backlog $283 $291 $326

21

The increase in orders received and the increase in the ending backlog in 2012 are due primarily

to strong demand for new products and certain mature products.

Production

Total unit production in 2012 increased 52% from 2011. This increase in unit production resulted

from investment in incremental capacity for new product introductions and from the utilization of

lean methodologies for continuous improvement in our operations. Our increase in production

was facilitated by $27.3 million of capital expenditures during 2012. These capital expenditures

exceeded depreciation by approximately $13.0 million during 2012, which represented an

approximate 7% increase to our capital equipment base.

Annual Summary Unit Data

Firearms unit data for orders, production, shipments and backorders follows:

2012 2011 2010

Units Ordered 2,879,200 1,388,100 842,700

Units Produced 1,697,800 1,114,700 906,200

Units Shipped 1,696,400 1,123,100 903,200

Average Sales Price $286 $289 $279

Units on Backorder 1,507,200 337,400 106,800

Inventories

The Company’s finished goods inventory decreased 600 units during 2012 and remains below

optimal levels to support rapid fulfillment of distributor demand. The Company has a goal of

replenishing its finished goods inventory in future periods to levels that will better serve its

customers. This replenishment could increase the FIFO value of finished goods inventory by as

much as $15 million from the current level upon the attainment of the desired levels of finished

goods inventory.

Distributor inventories of the Company’s products decreased 76,400 units during 2012 and are

significantly below the optimal level to support rapid fulfillment of retailer demand.

22

Inventory data follows:

December 31,

2012 2011 2010

Units – Company Inventory

15,600

16,200

23,600

Units – Distributor Inventory (3) 59,200 135,600 97,700

Total inventory (4) 74,800 151,800 121,300

(3) Distributor ending inventory as provided by the independent distributors of the

Company’s products. These numbers do not include goods-in-transit inventory

that has been shipped from the Company but not yet received by the distributors.

(4) This total does not include inventory at retailers. The Company does not have

access to data on retailer inventories.

Year ended December 31, 2012, as compared to year ended December 31, 2011:

Net Sales

Consolidated net sales were $491.8 million in 2012. This represents an increase of $163.0 million

or 49.6% from 2011 consolidated net sales of $328.8 million.

Firearms segment net sales were $484.9 million in 2012. This represents an increase of $160.7

million or 49.7% from 2011 firearm net sales of $324.2 million. Firearms unit shipments

increased 51.0% in 2012.

Casting segment net sales were $6.9 million in 2012. This represents an increase of $2.3 million

or 50.0% from 2011 casting sales of $4.6 million.

Cost of Products Sold and Gross Profit

Consolidated cost of products sold was $312.9 million in 2012. This represents an increase of

$95.8 million or 44.1% from 2011 consolidated cost of products sold of $217.1 million.

23

The gross margin was 36.4% in 2012. This represents an increase from the 2011 gross margin of

34.0% as illustrated below:

(in thousands)

Year Ended December 31, 2012 2011

Net sales $491,824 100.0% $328,816 100.0%

Cost of products sold, before LIFO,

overhead and labor rate adjustments to

inventory, and product liability 310,674 63.2% 214,524 65.2%

LIFO expense 1,159 0.3% 122 0%

Overhead rate adjustments to inventory 665 0.1% 700 0.3%

Labor rate adjustments to inventory 196 0% 95 0%

Product liability 177 0% 1,617 0.5%

Total cost of products sold 312,871 63.6% 217,058 66.0%

Gross profit $178,953 36.4% $111,758 34.0%

Cost of products sold, before LIFO, overhead and labor rate adjustments to inventory, and product

liability- In 2012, cost of products sold, before LIFO, overhead and labor rate adjustments to

inventory, and product liability decreased as a percentage of sales by 2.0% compared to 2011.

The main contributors to this decrease include the introduction of several new products which

increased overall volume thereby favorably leveraging manufacturing overhead and improved

productivity from continued emphasis on lean manufacturing techniques, which was partially

offset by increased direct material cost.

LIFO- Gross inventories increased by $6.8 million and $0.2 million in 2012 and 2011,

respectively. In 2012, the Company recognized LIFO expense of $1.2 million which increased

cost of products sold. In 2011, the Company recognized a LIFO expense of $0.1 million which

increased cost of products sold.

Overhead Rate Change- The net impact on inventory in 2012 from the change in the overhead

rates used to absorb overhead expenses into inventory was a decrease of $0.7 million, reflecting

increased overhead efficiency. This decrease in inventory value resulted in a corresponding

increase to cost of products sold in 2012. In 2011, the change in inventory value resulting from

the change in the overhead rate used to absorb overhead expenses into inventory was a decrease

of $0.7 million, reflecting increased overhead efficiency. This decrease in inventory value

resulted in a corresponding increase to cost of products sold.

24

Labor Rate Adjustments- In 2012, the change in inventory value resulting from the change in the

labor rates used to absorb labor expenses into inventory was a decrease of $0.2 million, reflecting

increased labor efficiency. This decrease in inventory value resulted in a corresponding increase

to cost of products sold. The net impact in 2010 from the change in the labor rates used to absorb

labor expenses into inventory was a decrease to inventory of $0.1 million, reflecting increased

labor efficiency. This decrease in inventory value resulted in a corresponding increase to cost of

products sold.

Product Liability- This expense includes the cost of outside legal fees, insurance, and other

expenses incurred in the management and defense of product liability matters. These costs totaled

$0.2 million and $1.6 million in 2012 and 2011, respectively. See Note 16 to the notes to the

financial statements “Contingent Liabilities” for further discussion of the Company’s product

liability.

Gross Profit- Gross profit was $179.0 million or 36.4% of sales in 2012. This is an increase of

$67.2 million from 2011 gross profit of $111.8 million or 34.0% of sales in 2011.

Selling, General and Administrative

Selling, general and administrative expenses were $67.5 million in 2012, an increase of $17.8

million from 2011, and a decrease from 15.1% of sales in 2011 to 13.7% of sales in 2012. The

increase in selling, general and administrative expenses is attributable to the following:

increased promotional and advertising expenses,

increased equity and performance-based compensation expense,

increased expenses related to the implementation of a new information technology

infrastructure, and

increased freight expense due to increased sales volume.

Other Operating Expenses (Income), net

Other operating expenses (income), net consist of the following (in thousands):

2012 2011

Gain on sale of operating assets $ (27) $ (83)

Frozen defined-benefit pension plan (income) expense 320 (236)

Total other operating (income) expenses, net $293 $(319)

Operating Income

Operating income was $111.1 million or 22.6% of sales in 2012. This is an increase of $48.7

million from 2011 operating income of $62.4 million or 19.0% of sales.

25

Royalty Income

Royalty income was $0.8 million in 2012. This represents a decrease of $0.1 million from 2011

royalty income of $0.9 million. The decrease is primarily attributable to decreased income from

licensing agreements.

Interest Income

Interest income was negligible in 2012 and 2011.

Interest Expense

Interest expense was negligible in 2012 and 2011.

Other Income, Net

Other income, net was $1.0 million in 2012, a decrease of $0.1 million from $1.1 million in 2011.

This income is attributable primarily to the sale of by-products of our manufacturing processes

and the gain on sale of non-operating real estate offset by the write-down of a cost basis

investment.

Income Taxes and Net Income

The effective income tax rate was 37.0% in 2012 and 2011.

As a result of the foregoing factors, consolidated net income was $70.6 million in 2012. This

represents an increase of $30.6 million from 2011 consolidated net income of $40.0 million.

26

Quarterly Data

To supplement the summary annual unit data and discussion above, the same data for the last

eight quarters follows:

2012

Q4 Q3 Q2 Q1

Units Ordered 1,069,200 318,300 291,500 1,200,100

Units Produced 463,500 436,800 418,500 379,000

Units Shipped 467,300 425,500 421,100 382,500

Estimated Units Sold from

Distributors to Retailers

504,700

396,900

410,300

460,800

Total Adjusted NICS Background

Checks

4,882,000

2,904,000

2,619,000

3,376,000

Average Sales Price $295 $273 $280 $290

Units on Backorder 1,507,200 908,700 1,016,700 1,153,500

Units – Company Inventory 15,600 21,400 10,400 12,800

Units – Distributor Inventory (5) 59,200 96,600 68,000 57,200

2011

Q4 Q3 Q2 Q1

Units Ordered 452,300 168,700 263,500 503,500

Units Produced 302,000 289,700 281,200 241,800

Units Shipped 315,100 276,500 279,600 251,800



291,800

244,700

264,400

284,300


Checks

3,457,000

2,374,000

2,220,000

2,739,000


Units on Backorder 337,400 204,500 315,500 332,700




Company’s products.

27

(in millions except average sales price, net of Federal Excise Tax)

2012

Q4 Q3 Q2 Q1

Orders Received $310.4 $92.9 $84.6 $308.7

Average Sales Price of Orders Received $290 $292 $290 $257

Ending Backlog $427.1 $249.7 $273.2 $304.4

Average Sales Price of Ending Backlog $283 $275 $269 $264

2011

Q4 Q3 Q2 Q1

Orders Received $120.3 $49.6 $81.4 $134.7

Average Sales Price of Orders Received $266 $294 $309 $268

Ending Backlog $98.2 $69.8 $97.4 $92.9

Average Sales Price of Ending Backlog $291 $341 $309 $279

28

Fourth Quarter Gross Profit Analysis

The gross margin for the fourth quarter of 2012 and 2011 was 34.9% and 32.4%, respectively.

Details of the gross margin are illustrated below:

(in thousands)

Three Months Ended December 31, 2012 2011

Net sales $141,767 100.0% $93,241 100.0%



inventory, and product liability 92,478 65.2% 62,532 67.1%

LIFO expense 200 0.1% 374 0.4%

Overhead rate adjustments to inventory (339) (0.2)% (141) (0.1)%

Labor rate adjustments to inventory 16 0% (189) (0.2)%

Product liability (49) 0% 493 0.4%


Gross profit $49,461 34.9% $30,172 32.4%

Note: For a discussion of the captions in the above table, please see the “Cost of Products Sold

and Gross Profit” discussion above.

29

Results of Operations - 2011

Year ended December 31, 2011, as compared to year ended December 31, 2010:

Annual Summary Unit Data

Firearms unit data for orders, production, shipments and ending inventory, and castings setups (a

measure of foundry production) are as follows:

2011 2010 2009

Units Ordered 1,388,100 842,700 958,700

Units Produced 1,114,700 906,200 934,300

Units Shipped 1,123,100 903,200 925,800

Average Sales Price $289 $279 $288

Units on Backorder 337,400 106,800 181,000

Units – Company Inventory 16,200 23,600 20,100

Units – Distributor Inventory (1) 135,600 97,700 96,200

Castings Setups 198,000 155,100 202,800

Orders Received and Ending Backlog

(in millions except average sales price, net of Federal Excise Tax):

2011 2010

Orders Received $385.9 $229.4

Average Sales Price of Orders Received (2) $278 $272

Ending Backlog (2) $98.2 $34.9

Average Sales Price of Ending Backlog (2) $291 $326



(2) Average sales price for orders received and ending backlog is net of Federal Excise

Tax of 10% for handguns and 11% for long guns.

30

Product Demand

The estimated sell-through of the Company’s products from distributors to retailers in 2011

increased 20% from 2010. During this period, National Instant Criminal Background Check

System (“NICS”) background checks (as adjusted by the National Shooting Sports Foundation)

increased 14%.

We believe the year-over-year increase in estimated sell-through from distributors to retailers

from 2010 is due to the following:

The strong demand for the new products launched in 2011, including the new LC9

pistol, the SR1911 pistol, the SR40c pistol, the Gunsite Scout rifle, the Single-Ten

revolver, and the SP-101 double-action revolver chambered in 22LR. New product

introductions remain a strong driver of demand and represented $98.6 million or 30% of

sales in 2011. The Ruger American Rifle and the SR22 pistol were introduced during

the latter part of the fourth quarter and did not have a significant impact in 2011 sales,

Strong demand for certain mature products, and

Increased manufacturing capacity and greater product availability for certain products in

strong demand.

Estimated sell-through from distributors to retailers and total NICS background checks follow:

2011 2010 2009

Estimated Units Sold from Distributors to

Retailers (1)

1,085,200

901,500

887,400

Total Adjusted NICS Background Checks

(thousands) (2)

10,800

9,400

9,500

(1) The estimates for each period were calculated by taking the beginning inventory at the

distributors, plus shipments from the Company to distributors during the period, less the

ending inventory at distributors. These estimates are only a proxy for actual market

demand as they:

Rely on data provided by independent distributors that are not verified by the

Company,

Do not consider potential timing issues within the distribution channel, including

goods-in-transit, and

Do not consider fluctuations in inventory at retail.

(2) While NICS background checks are not a precise measure of retail activity, they are

commonly used as a proxy for retail demand. NICS background checks are performed

when the ownership of most firearms, either new or used, is transferred by a Federal

Firearms Licensee. NICS background checks are also performed for permit applications,

permit renewals, and other administrative reasons.

31

The adjusted NICS data presented above was derived by the National Shooting Sports

Foundation (“NSSF”) by subtracting out NICS checks that are not directly related to the

sale of a firearm, including checks used for concealed carry (“CCW”) permit application

checks as well as checks on active CCW permit databases. While not a direct correlation

to firearms sales, the NSSF-adjusted NICS data provides a more accurate picture of current

market conditions than raw NICS data.

The Company launched the SR9c compact pistol, the LCR357 revolver, and the SR40 striker-

fired pistol in 2010. New product introductions, including the aforementioned products,

represented $62.3 million or 24.8% of sales in 2010.

The increase in orders received and the increase in the ending backlog in 2011 are due primarily

to strong for demand new products, including the Ruger American Rifle and the SR22 pistol

which were introduced in the latter part of the fourth quarter of 2011, and certain mature products.

The average sales price of orders received and ending backlog in 2010 decreased from 2009 due

to significant orders in 2009 for certain higher-priced rifles, including the SR-556.

Production

Total unit production in 2011 increased 23% from 2010. The increased production was due in

part to the Company’s previously disclosed strategy of changing production rates less frequently

in 2011 in a more deliberate effort to “level load” production throughout the year.

The intention of this planned change in production volumes was to build finished goods inventory

during the period when we expect lesser demand (typically the third quarter and the first half of

the fourth quarter) so that we have more finished goods inventory available to ship during the

period when we expect greater demand (typically the end of the fourth quarter and the first

quarter). The annual output of our manufacturing plants in 2011 did increase under this plan

which, in turn, allowed us to better capitalize on sales opportunities, particularly during the fourth

quarter.

The Company continues to further implement lean manufacturing principles across its facilities.

This ongoing process began in 2006, and includes the following current initiatives:

transitioning from batch production to single-piece flow manufacturing,

refining existing cells and, where practical, consolidating smaller cells into value-

stream super cells,

developing pull systems and managing vendors,

increasing capacity for the products with the greatest unmet demand, and

re-engineering matureproduct designs for improved manufacturability.

Inventories

The Company’s finished goods inventory decreased 7,400 units during 2011 and were

significantly below what the Company believes to be optimal levels to support rapid fulfillment of

distributor demand.

32

Quarterly Summary Unit Data

To supplement the summary annual unit data and discussion above, the same data for the last

eight quarters follows:

2011

Q4 Q3 Q2 Q1

Units Ordered 452,300 168,700 263,500 503,500

Units Produced 302,000 289,700 281,200 241,800

Units Shipped 315,100 276,500 279,600 251,800



291,800

244,700

264,400

284,300


Checks (thousands)

3,500

2,400

2,200

2,700





2010

Q4 Q3 Q2 Q1

Units Ordered 241,900 156,500 138,400 305,900

Units Produced 218,300 207,100 238,900 241,900

Units Shipped 236,200 204,200 225,500 237,300



235,200

198,700

213,400

254,200


Checks (thousands)

2,900

2,100

2,000

2,400







33

(in millions except average sales price, net of Federal Excise Tax)

2011

Q4 Q3 Q2 Q1

Orders Received $120.3 $49.6 $81.4 $134.7

Average Sales Price of Orders Received(4) $266 $294 $309 $268

Ending Backlog $98.2 $69.8 $97.4 $92.9

Average Sales Price of Ending Backlog(4) $291 $341 $309 $279

2010

Q4 Q3 Q2 Q1

Orders Received $63.3 $45.6 $38.7 $81.8

Average Sales Price of Orders Receive (4) $262 $291 $279 $270

Ending Backlog $34.9 $34.1 $44.9 $71.8

Average Sales Price of Ending Backlog (4) $326 $342 $304 $299

(4) Average sales price for orders received and ending backlog is net of Federal Excise Tax

of 10% for handguns and 11% for long guns.

Net Sales

Consolidated net sales were $328.8 million in 2011. This represents an increase of $73.6 million

or 28.8% from 2010 consolidated net sales of $255.2 million.

Firearms segment net sales were $324.2 million in 2011. This represents an increase of $72.5

million or 28.8% from 2010 firearm net sales of $251.7 million. Firearms unit shipments

increased 24.4% in 2011.

Casting segment net sales were $4.6 million in 2011. This represents an increase of $1.1 million

or 30.9% from 2010 casting sales of $3.5 million.

Cost of Products Sold and Gross Profit

Consolidated cost of products sold was $217.1 million in 2011. This represents an increase of

$45.8 million or 26.8% from 2010 consolidated cost of products sold of $171.2 million.

34

The gross margin was 34.0% in 2011. This represents an increase from the 2010 gross margin of

32.9% as illustrated below:

(in thousands)

Year Ended December 31, 2011 2010

Net sales $328,816 100.0% $255,206 100.0%



inventory, product liability and product

recall 214,506 65.2% 173,198 67.8%

LIFO expense (income) 122 0% (1,039) (0.4)%

Overhead rate adjustments to inventory 700 0.3% (618) (0.2)%

Labor rate adjustments to inventory 95 0% (364) (0.1)%

Product liability 1,617 0.5% 9 0%

Product recalls 18 0% 38 0%


Gross profit $111,758 34.0% $ 83,982 32.9%

Cost of products sold, before LIFO, overhead and labor rate adjustments to inventory, product

liability, and product recall- In 2011, cost of products sold, before LIFO, overhead and labor rate

adjustments to inventory, product liability, and product recall decreased as a percentage of sales

by 2.6% compared to 2010. The main contributors to this decrease include the increased overall

volume which favorably leveraged manufacturing overhead and improved productivity from

continued emphasis on lean manufacturing techniques, partially offset by a modest increase in

input costs.

LIFO- Gross inventories increased by $0.2 million in 2011 and decreased by $2.2 million in 2010.

In 2011, the Company recognized LIFO expense of $0.1 million which increased cost of products

sold. In 2010, the Company recognized a LIFO credit of $1.0 million which decreased cost of

products sold.

Overhead Rate Change- The net impact on inventory in 2011 from the change in the overhead

rates used to absorb overhead expenses into inventory was a decrease of $0.7 million, reflecting

increased overhead efficiency. This decrease in inventory value resulted in a corresponding

increase to cost of products sold in 2011. In 2010, the change in inventory value resulting from

the change in the overhead rate used to absorb overhead expenses into inventory was an increase

35

of $1.1 million, reflecting decreased overhead efficiency. This increase in inventory value

resulted in a corresponding decrease to cost of products sold.

Labor Rate Adjustments- In 2011, the change in inventory value resulting from the change in the

labor rates used to absorb labor expenses into inventory was a decrease of $0.6 million, reflecting

increased labor efficiency. This decrease in inventory value resulted in a corresponding increase

to cost of products sold. The net impact in 2010 from the change in the labor rates used to absorb

labor expenses into inventory was an increase to inventory of $0.4 million, reflecting decreased

labor efficiency. This increase in inventory value resulted in a corresponding decrease to cost of

sales.

Product Liability- This expense includes the cost of outside legal fees, insurance, and other

expenses incurred in the management and defense of product liability matters. These costs totaled

$1.6 million in 2011. The negligible expense in 2010 reflects favorable experience in product

liability matters that were resolved during 2010. See Note 16 to the notes to the financial

statements “Contingent Liabilities” for further discussion of the Company’s product liability.

Product Recalls- In 2008, the Company received a small number of reports from the field that its

SR9 pistols, and later, its LCP pistols, could discharge if dropped onto a hard surface. The

Company began recalling SR9 pistols in April 2008 and LCP pistols in October 2008 to offer free

safety retrofits. The cost of these safety retrofit programs was negligible in 2011 and 2010.

Gross Profit- Gross profit was $111.8 million or 34.0% of sales in 2011. This is an increase of

$27.8 million from 2010 gross profit of $84.0 million or 32.9% of sales.

Selling, General and Administrative

Selling, general and administrative expenses were $49.7 million in 2011, an increase of $9.5

million from 2010, and a decrease from 15.7% of sales in 2010 to 15.1% of sales in 2011. The

increase in selling, general and administrative expenses is attributable to the following:

increased promotional and advertising expenses, including the Million Gun Challenge to

benefit the National Rifle Association,

increased expenses related to the implementation of a new information technology

infrastructure,

increased equity-based and incentive compensation, and

increased freight expense due to increased sales volume.

Other Operating (Income) Expenses, net

Other operating (income) expenses, net consist of the following (in thousands):

2011 2010

Loss (gain) on sale of operating assets $ (83) $ 22

Frozen defined-benefit pension plan expense (236) 398

Total other operating (income) expenses, net $(319) $420

36

Operating Income

Operating income was $62.4 million or 19% of sales in 2011. This is an increase of $19.0 million

from 2010 operating income of $43.4 million or 17.0% of sales.

Royalty Income

Royalty income was $0.9 million in 2011. This represents an increase of $0.5 million from 2010

royalty income of $0.4 million. The increase is primarily attributable to increased income from

licensing agreements.

Interest Income

Interest income was negligible in 2011 and 2010.

Interest Expense

Interest expense was negligible in 2011 and 2010.

Other Income, Net

Other income, net was $0.3 million in 2011, a decrease of $0.1 million from a $0.4 million in

2010. This income is attributable primarily to the sale of by-products of our manufacturing

processes.

Income Taxes and Net Income

The effective income tax rate in 2011 was 37.0%, compared to 36.0% in 2010. The increase in

the income tax rate reflects an increase in permanent differences.

As a result of the foregoing factors, consolidated net income was $40.0 million in 2011. This

represents an increase of $11.7 million from 2010 consolidated net income of $28.3 million.

Financial Condition

Liquidity

At December 31, 2012, the Company had cash and cash equivalents of $31.0 million. Our pre-

LIFO working capital of $75.5 million, less the LIFO reserve of $38.1 million, resulted in

working capital of $37.4 million and a current ratio of 1.6 to 1.

On December 21, 2012, the Company paid a special dividend of $4.50 per share to shareholders

of record on December 7, 2012. This dividend totaled $86.7 million.

The Company would like to replenish its finished goods inventory to levels that will better serve

its customers. This replenishment, which could take more than one year to accomplish, could

increase the FIFO value of finished goods inventory by as much as $15 million from the current

levels upon the attainment of the desired levels of finished goods inventory.

37

Operations

Cash provided by operating activities was $87.2 million, $57.4 million, and $32.5 million in

2012, 2011, and 2010, respectively. The increase in cash provided in 2012 compared to 2011 is

attributable to increased profitability in 2012. The increase in cash provided in 2011 compared to

2010 is attributable to increased profitability in 2011 and increased accounts payable and accrued

liabilities in 2011, due in part to greater accruals for sales promotions and excise tax payments.

Third parties supply the Company with various raw materials for its firearms and castings, such as

fabricated steel components, walnut, birch, beech, maple and laminated lumber for rifle stocks,

wax, ceramic material, metal alloys, various synthetic products and other component parts. There

is a limited supply of these materials in the marketplace at any given time, which can cause the

purchase prices to vary based upon numerous market factors. The Company believes that it has

adequate quantities of raw materials in inventory or on order to provide sufficient time to locate

and obtain additional items at then-current market cost without interruption of its manufacturing

operations. However, if market conditions result in a significant prolonged inflation of certain

prices or if adequate quantities of raw materials can not be obtained, the Company’s

manufacturing processes could be interrupted and the Company’s financial condition or results of

operations could be materially adversely affected.

Investing and Financing

Capital expenditures were $27.3 million, $22.1 million, and $19.4 million in 2012, 2011, and

2010, respectively. In 2013, the Company expects to spend $30 million on capital expenditures to

purchase tooling and fixtures for new product introductions, to increase production capacity, and

to upgrade and modernize manufacturing equipment. The Company finances, and intends to

continue to finance, all of these activities with funds provided by operations and current cash and

short-term investments.

During the past several years, the Board of Directors authorized the Company to repurchase

shares of its common stock. In 2011, the Company repurchased approximately 133,400 shares of

its common stock representing 0.7% of the then outstanding shares, in the open market at an

average price of $14.94 per share. In 2010, the Company repurchased approximately 412,000

shares of its common stock representing 2.1% of the then outstanding shares, in the open market

at an average price of $13.83 per share. All of these purchases were made with cash held by the

Company and no debt was incurred. In 2012, no shares were repurchased.

At December 31, 2012, $8.0 million remained authorized for share repurchases.

Including the $4.50 per share special dividend paid on December 21, 2012, the Company paid

dividends totaling $111.5 million, $8.2 million and $6.3 million in 2012, 2011 and 2010,

respectively.

On February 11, 2013, the Company’s Board of Directors authorized a dividend of 40.4¢ per

share to shareholders of record on March 8, 2013. The payment of future dividends depends on

many factors, including internal estimates of future performance, then-current cash and short-term

investments, and the Company’s need for funds.

38

During the second quarter of 2011, the Company made a $1.0 million minority investment in a

pepper spray company for which it received a 12% interest. In the second quarter of 2012, the

Company made a subsequent investment of $0.3 million in the same company and now has a 19%

interest. At December 31, 2012, the Company recognized an impairment loss of $1.1 million in

this investment.

In the second quarter of 2012, the Company made a $1.3 million investment in a crossbow

company for which it received a 29% interest.

The Company has migrated its retirement benefits from defined-benefit pension plans to defined-

contribution retirement plans, utilizing its current 401(k) plan.

The Company amended its hourly and salaried defined-benefit pension plans so that employees

no longer accrued benefits under them effective December 31, 2007. This action “froze” the

benefits for all employees and prevented future hires from joining the plans. Currently, the

Company provides supplemental discretionary contributions to substantially all employees’

individual 401(k) accounts.

Minimum contributions of $2.6 million were required for the defined-benefit plans for 2012. The

Company contributed $3 million and $2 million in 2012 and 2011, respectively.

In future years, the Company will likely be required to make cash contributions to the two

defined-benefit pension plans. The annual contributions will be based on the amount of the

unfunded plan liabilities derived from the frozen benefits and will not include liabilities for any

future accrued benefits for any new or existing participants. The total amount of these future cash

contributions will depend on the investment returns generated by the plans’ assets and the then-

applicable discount rates used to calculate the plans’ liabilities.

The Company plans to contribute approximately $3 million in 2013, but will increase the amount

of the contribution if required to do so.

Based on its unencumbered assets, the Company believes it has the ability to raise cash through

issuance of short-term or long-term debt. The Company’s unsecured $25 million credit facility

remained unused at December 31, 2012 and the Company has no debt. In February 2013, the

Company amended its credit facility to raise the availability to $40 million and extend the

expiration date to June 15, 2014.

Contractual Obligations The table below summarizes the Company’s significant contractual obligations at December 31,

2012, and the effect such obligations are expected to have on the Company’s liquidity and cash

flows in future periods. This table excludes amounts already recorded on the Company’s balance

sheet as current liabilities at December 31, 2012.

“Purchase Obligations” as used in the below table includes all agreements to purchase goods or

services that are enforceable and legally binding on the Company and that specify all significant

terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price

provisions; and the approximate timing of the transaction. Certain of the Company’s purchase

orders or contracts for the purchase of raw materials and other goods and services that may not

necessarily be enforceable or legally binding on the Company, are also included in “Purchase

39

Obligations” in the table. Certain of the Company’s purchase orders or contracts therefore

included in the table may represent authorizations to purchase rather than legally binding

agreements. The Company expects to fund all of these commitments with cash flows from

operations and current cash.

Payment due by period (in thousands)

Contractual Obligations

Total

Less than

1 year

1-3 years

3-5 years

More

than 5

years

Long-Term Debt Obligations - - - - -

Capital Lease Obligations - - - - -

Operating Lease Obligations - - - - -

Purchase Obligations $24,960 $24,960 - - -

Other Long-Term Liabilities

Reflected on the

Registrant’s Balance

Sheet under GAAP

-

-

-

-

-

Total $24,960 $24,960 - - -

The expected timing of payment of the obligations discussed above is estimated based on current

information. Timing of payments and actual amounts paid may be different depending on the

time of receipt of goods or services or changes to agreed-upon amounts for some obligations.

Firearms Legislation and Litigation

See Item 1A - Risk Factors and Note 16 to the financial statements for discussion of firearms

legislation and litigation. Other Operational Matters

In the normal course of its manufacturing operations, the Company is subject to occasional

governmental proceedings and orders pertaining to workplace safety, firearms serial number

tracking and control, waste disposal, air emissions and water discharges into the environment.

The Company believes that it is generally in compliance with applicable BATFE, environmental,

and safety regulations and the outcome of any proceedings or orders will not have a material

adverse effect on the financial position or results of operations of the Company.

The Company self-insures a significant amount of its product liability, workers’ compensation,

medical, and other insurance. It also carries significant deductible amounts on various insurance

policies.

The Company is transitioning to a new enterprise resource planning system and has converted all

of its manufacturing facilities and its support functions during the past two years. The remaining

manufacturing facilities were converted in 2012.

The valuation of the future defined-benefit pension obligations at December 31, 2012 and 2011

indicated that these plans were underfunded by $19.6 million and $19.1 million, respectively, and

40

resulted in a cumulative other comprehensive loss of $29.6 million and $27.5 million on the

Company’s balance sheet at December 31, 2012 and 2011, respectively.

The Company expects to realize its deferred tax assets through tax deductions against future

taxable income. Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally

accepted in the United States requires management to make assumptions and estimates that affect

the reported amounts of assets and liabilities as of the balance sheet date and net sales and

expenses recognized and incurred during the reporting period then ended. The Company bases

estimates on prior experience, facts and circumstances, and other assumptions, including those

reviewed with actuarial consultants and independent counsel, when applicable, that are believed

to be reasonable. However, actual results may differ from these estimates.

The Company believes the determination of its product liability accrual is a critical accounting

policy. The Company’s management reviews every lawsuit and claim and is in contact with

independent and corporate counsel on an ongoing basis. The provision for product liability

claims is based upon many factors, which vary for each case. These factors include the type of

claim, nature and extent of injuries, historical settlement ranges, jurisdiction where filed, and

advice of counsel. An accrual is established for each lawsuit and claim, when appropriate, based

on the nature of each such lawsuit or claim.

Amounts are charged to product liability expense in the period in which the Company becomes

aware that a claim or, in some instances a threat of claim, has been made when potential losses or

costs of defense are probable and can be reasonably estimated. Such amounts are determined

based on the Company’s experience in defending similar claims. Occasionally, charges are made

for claims made in prior periods because the cumulative actual costs incurred for that claim, or

reasonably expected to be incurred in the future, exceed amounts already provided. Likewise,

credits may be taken if cumulative actual costs incurred for that claim, or reasonably expected to

be incurred in the future, are less than amounts previously provided.

While it is not possible to forecast the outcome of litigation or the timing of costs, in the opinion

of management, after consultation with independent and corporate counsel, there is a remote

likelihood that litigation, including punitive damage claims, will have a material adverse effect on

the financial position of the Company, but may have a material impact on the Company’s

financial results for a particular period.

The Company believes the valuation of its inventory and the related excess and obsolescence

reserve is also a critical accounting policy. Inventories are carried at the lower of cost, principally

determined by the last-in, first-out (LIFO) method, or market. An actual valuation of inventory

under the LIFO method is made at the end of each year based on the inventory levels and

prevailing inventory costs existing at that time.

The Company determines its excess and obsolescence reserve by projecting the year in which

inventory will be consumed into a finished product. Given ever-changing market conditions,

customer preferences and the anticipated introduction of new products, it does not seem prudent

nor supportable to carry inventory at full cost beyond that needed during the next 36 months.

41

Forward-Looking Statements and Projections

The Company may, from time to time, make forward-looking statements and projections

concerning future expectations. Such statements are based on current expectations and are subject

to certain qualifying risks and uncertainties, such as market demand, sales levels of firearms,

anticipated castings sales and earnings, the need for external financing for operations or capital

expenditures, the results of pending litigation against the Company, the impact of future firearms

control and environmental legislation and accounting estimates, any one or more of which could

cause actual results to differ materially from those projected. Words such as “expect,” “believe,”

“anticipate,” “intend,” “estimate,” “will,” “should,” “could” and other words and terms of similar

meaning, typically identify such forward-looking statements. Readers are cautioned not to place

undue reliance on these forward-looking statements, which speak only as of the date made. The

Company undertakes no obligation to publish revised forward-looking statements to reflect events

or circumstances after the date such forward-looking statements are made or to reflect the

occurrence of subsequent unanticipated events.

ITEM 7A—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

RISK The Company is exposed to changing interest rates on its investments, which consist primarily of

United States Treasury instruments with short-term (less than one year) maturities and cash. The

interest rate market risk implicit in the Company's investments at any given time is low, as the

investments mature within short periods and the Company does not have significant exposure to

changing interest rates on invested cash.

The Company has not undertaken any actions to cover interest rate market risk and is not a party

to any interest rate market risk management activities.

A hypothetical 100 basis point change in market interest rates over the next year would not

materially impact the Company’s earnings or cash flows. A hypothetical 100 basis point change

in market interest rates would not have a material effect on the fair value of the Company’s

investments.

42

ITEM 8—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm

43 Balance Sheets at December 31, 2012 and 2011 45 Statements of Income and Comprehensive Income for the

years ended December 31, 2012, 2011 and 2010

47 Statements of Stockholders’ Equity for the years ended

December 31, 2012, 2011 and 2010

48 Statements of Cash Flows for the years ended December

31, 2012, 2011 and 2010

49 Notes to Financial Statements 50

43

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Sturm, Ruger & Company, Inc.

We have audited Sturm, Ruger & Company, Inc.'s internal control over financial reporting as of December

31, 2012, based on criteria established in Internal Control—Integrated Framework issued by the

Committee of Sponsoring Organizations of the Treadway Commission. Sturm, Ruger & Company, Inc.’s

management is responsible for maintaining effective internal control over financial reporting and for its

assessment of the effectiveness of internal control over financial reporting included in the accompanying

Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our

responsibility is to express an opinion on the Company's internal control over financial reporting based on

our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight

Board (United States). Those standards require that we plan and perform the audit to obtain reasonable

assurance about whether effective internal control over financial reporting was maintained in all material

respects. Our audit included obtaining an understanding of internal control over financial reporting,

assessing the risk that a material weakness exists, and testing and evaluating the design and operating

effectiveness of internal control based on the assessed risk. Our audit also included performing such other

procedures as we considered necessary in the circumstances. We believe that our audit provides a

reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance

regarding the reliability of financial reporting and the preparation of financial statements for external

purposes in accordance with generally accepted accounting principles. A company's internal control over

financial reporting includes those policies and procedures that (a) pertain to the maintenance of records

that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the

company; (b) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted accounting principles, and that

receipts and expenditures of the company are being made only in accordance with authorizations of

management and directors of the company; and (c) provide reasonable assurance regarding prevention or

timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a

material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect

misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk

that controls may become inadequate because of changes in conditions, or that the degree of compliance

with the policies or procedures may deteriorate.

In our opinion, Sturm, Ruger & Company, Inc. maintained, in all material respects, effective internal

control over financial reporting as of December 31, 2012, based on criteria established in Internal

Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway

Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight

Board (United States), the balance sheets of Sturm, Ruger & Company, Inc. as of December 31, 2012 and

2011, and the related statements of income and comprehensive income, stockholders’ equity, and cash

flows for each of the three years in the period ended December 31, 2012, and our report dated February 27,

2013 expressed an unqualified opinion.

/s/McGladrey LLP

Stamford, Connecticut

February 27, 2013

44

Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders


We have audited the accompanying balance sheets of Sturm, Ruger & Company, Inc. as of December 31,

2012 and 2011, and the related statements of income and comprehensive income, stockholders’ equity, and

cash flows for each of the three years in the period ended December 31, 2012. Our audits also included the

financial statement schedule of Sturm, Ruger & Company, Inc. listed in Item 15(a). These financial

statements and financial statement schedule are the responsibility of the Company's management. Our

responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight

Board (United States). Those standards require that we plan and perform the audit to obtain reasonable

assurance about whether the financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statement presentation. We believe that our audits

provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the

financial position of Sturm, Ruger & Company, Inc. as of December 31, 2012 and 2011, and the results of

its operations and its cash flows for each of the three years in the period ended December 31, 2012, in

conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial

statement schedule, when considered in relation to the basic financial statements taken as a whole, presents

fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight

Board (United States), Sturm, Ruger & Company, Inc.’s internal control over financial reporting as of

December 31, 2012, based on criteria established in Internal Control—Integrated Framework issued by

the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February

27, 2013 expressed an unqualified opinion on the effectiveness of Sturm, Ruger & Company, Inc.’s

internal control over financial reporting.

/s/McGladrey LLP

Stamford, Connecticut

February 27, 2013

45

Balance Sheets

(Dollars in thousands, except per share data)

December 31, 2012 2011

Assets

Current Assets

Cash and cash equivalents $ 30,978 $ 81,056

Trade receivables, net 43,018 42,225

Gross inventories

Less LIFO reserve

Less excess and obsolescence reserve

55,827

(38,089)

(1,729)

49,004

(37,476)

(1,311)

Net inventories 16,009 10,217

Deferred income taxes 5,284 5,776

Prepaid expenses and other current assets 1,632 6,968

Total Current Assets 96,921 146,242

Property, Plant, and Equipment 195,713 169,142

Less allowances for depreciation (129,720) (116,195)

Net property, plant and equipment 65,993 52,947

Deferred income taxes 2,004 32

Other assets 9,568 7,289

Total Assets $174,486 $206,510

See accompanying notes to financial statements.

46

December 31, 2012 2011

Liabilities and Stockholders’ Equity

Current Liabilities

Trade accounts payable and accrued expenses $38,500 $ 28,592

Product liability 720 1,305

Employee compensation and benefits 15,182 14,882

Workers’ compensation 4,600 4,600

Income taxes payable 489 217

Total Current Liabilities 59,491 49,596

Accrued pension liability 19,626 19,082

Product liability 337 441

Contingent liabilities (Note 16) - -

Stockholders’ Equity

Common stock, non-voting, par value $1:

Authorized shares – 50,000; none issued

Common stock, par value $1:

Authorized shares – 40,000,000

2012 – 23,562,422 issued,

19,262,988 outstanding

2011 – 23,382,566 issued,

19,083,132 outstanding

23,563

23,383

Additional paid-in capital 15,531 10,454

Retained earnings 123,442 168,981

Less: Treasury stock – at cost

2012 and 2011 – 4,299,434 shares

(37,884)

(37,884)

Accumulated other comprehensive loss (29,620) (27,543)

Total Stockholders’ Equity 95,032 137,391

Total Liabilities and Stockholders’ Equity $174,486 $206,510


47

Statements of Income and Comprehensive Income

(In thousands, except per share data)

Year ended December 31, 2012 2011 2010

Net firearms sales $484,933 $324,200 $251,680

Net castings sales 6,891 4,616 3,526

Total net sales 491,824 328,816 255,206

Cost of products sold 312,871 217,058 171,224

Gross profit 178,953 111,758 83,982

Operating Expenses:

Selling 38,363 28,691 23,517

General and administrative 29,231 20,970 16,652

Other operating expenses (income), net 293 (319) 420

Total operating expenses 67,887 49,342 40,589

Operating income 111,066 62,416 43,393

Other income:

Royalty income 824 873 429

Interest income 34 29 48

Interest expense (95) (110) (143)

Other income, net 280 308 422

Total other income, net 1,043 1,100 756

Income before income taxes 112,109 63,516 44,149

Income taxes 41,480 23,501 15,894

Net income 70,629 40,015 28,255

Other comprehensive (loss) income, net of tax:

Defined benefit pension plans (2,077) (7,895) 714

Comprehensive income $ 68,552 $ 32,120 $ 28,969

Basic Earnings Per Share $ 3.69 $ 2.12 $ 1.48

Fully Diluted Earnings Per Share $ 3.60 $ 2.09 $ 1.46

Cash Dividends Per Share $ 5.80 $ 0.43 $ 0.33


48

Statements of Stockholders’ Equity

(Dollars in thousands)

Common

Stock

Additional

Paid-in

Capital

Retained

Earnings

Treasury

Stock

Accumulated

Other

Comprehensive

Loss

Total

Balance at December 31, 2009 $22,827 $8,031 $115,187 $(30,167) $(20,362) $95,516

Net income 28,255 28,255

Pension liability, net of

deferred taxes of $460

714

714

Dividends paid (6,317) (6,317)

Stock-based compensation 2,589 2,589

Exercise of stock options and

vesting of RSU’s

(1,367)

(1,367)

Tax benefit realized from exercise

of stock options and vesting of

RSU’s

808

808

Common stock issued –

compensation plans

176

(176)

-

Repurchase of 412,213 shares of

common stock

(5,718)

(5,718)

Balance at December 31, 2010 23,003 9,885 137,125 (35,885) (19,648) 114,480

Net income 40,015 40,015


deferred taxes of $4,133

(7,895)

(7,895)

Dividends paid (8,159) (8,159)



vesting of RSU’s

(5,859)

(5,859)



RSU’s

3,855

3,855


compensation plans

380

(380)

-

Repurchase of 133,400 shares of

common stock

(1,999)

(1,999)

Balance at December 31, 2011 23,383 10,454 168,981 (37,884) (27,543) 137,391

Net income 70,629 70,629


deferred taxes of $1,219

(2,077)

(2,077)

Dividends paid (111,523) (111,523)



vesting of RSU’s

(2,935)

(2,935)



RSU’s

3,474

3,474


compensation plans

180

(180)

-

Unpaid dividends accrued (4,645) (4,645)

Balance at December 31, 2012 $23,563 $15,531 $123,442 $(37,884) $(29,620) $95,032


49

Statements of Cash Flows

(In thousands)


Operating Activities

Net income $70,629 $40,015 $28,255

Adjustments to reconcile net income to cash

provided by operating activities:

Depreciation and amortization 14,888 12,148 9,207

Stock-based compensation 4,718 2,953 2,589

Excess and obsolescence inventory reserve 761 (234) (1,057)

Loss (gain) on sale of assets (944) (26) 22

Deferred income taxes (1,480) 8,205 493

Impairment charge (1,134) - -

Changes in operating assets and liabilities:

Trade receivables (793) (10,660) (6,516)

Inventories (6,553) (156) 888

Trade accounts payable and accrued expenses 9,908 11,807 3,932

Employee compensation and benefits (4,345) 3,959 (1,967)

Product liability (689) 724 (1,060)

Prepaid expenses, other assets and other

liabilities

1,947

(10,961)

(1,333)

Income taxes payable 272 (365) (962)

Cash provided by operating activities 87,185 57,409 32,491

Investing Activities

Property, plant, and equipment additions (27,282) (22,135) (19,409)

Purchases of short-term investments (59,966) (122,978) (164,966)

Proceeds from sales or maturities of short-term

investments

59,966

175,471

163,214

Net proceeds from sale of assets 1,003 319 21

Cash (used for) provided by investing activities (26,279) 30,677 (21,140)

Financing Activities

Dividends paid (111,523) (8,159) (6,317)

Tax benefit from exercise of stock options 3,474 3,855 1,923

Repurchase of common stock - (1,999) (5,718)

Payment of employee withholding tax related to

share-based compensation

(3,083)

(5,859)

(1,115)

Proceeds from exercise of stock options 148 - -

Cash used for financing activities (110,984) (12,162) (11,227)

(Decrease) increase in cash and cash equivalents (50,078) 75,924 124

Cash and cash equivalents at beginning of year 81,056 5,132 5,008

Cash and cash equivalents at end of year $ 30,978 $ 81,056 $ 5,132


50

Notes to Financial Statements (Dollars in thousands, except per share)

1. Summary of Significant Accounting Policies

Organization



total sales for the year ended December 31, 2012 were from the firearms segment and export sales

represented approximately 3% of firearms sales. The Company’s design and manufacturing

operations are located in the United States and almost all product content is domestic. The

Company’s firearms are sold through a select number of independent wholesale distributors

principally to the commercial sporting market.

The Company also manufactures and sells investment castings made from steel alloys for both

outside customers and internal use in the firearms segment. Investment castings sold to outside

customers, either directly to or through manufacturers’ representatives, were approximately 1% of

the Company’s total sales for the year ended December 31, 2012.

Preparation of Financial Statements

The Company follows United States generally accepted accounting principles (“GAAP”). The

preparation of financial statements in conformity with GAAP requires management to make

estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

of contingent liabilities at the date of the financial statements and the reported amounts of

revenues and expenses during the reporting period. Actual results could differ from these

estimates.

The significant accounting policies described below, together with the notes that follow, are an

integral part of the Financial Statements. Revenue Recognition

Substantially all product sales are sold FOB (free on board) shipping point. Revenue is recognized

when product is shipped and the customer takes ownership and assumes the risk of loss. Accruals

are made for sales discounts and incentives based on the Company’s experience. The Company

accounts for cash sales discounts as a reduction in sales and sales incentives as a charge to selling

expense. Amounts billed to customers for shipping and handling fees are included in net sales

and costs incurred by the Company for the delivery of goods are classified as selling expenses.

Federal excise taxes are excluded from net sales. Cash and Cash Equivalents

The Company considers interest-bearing deposits with financial institutions with remaining

maturities of three months or less at the time of acquisition to be cash equivalents.

51

Accounts Receivable

The Company establishes an allowance for doubtful accounts based on the credit worthiness of its

customers and historical experience. While the Company uses the best information available to

make its evaluation, future adjustments to the allowance for doubtful accounts may be necessary

if there are significant changes in economic and industry conditions or any other factors

considered in the Company’s evaluation. Bad debt expense has been immaterial during each of

the last three years.

Inventories

Substantially all of the Company’s inventories are valued at the lower of cost, principally

determined by the last-in, first-out (LIFO) method, or market. Elements of cost in inventories

include raw materials, direct labor and manufacturing overhead.

Property, Plant, and Equipment

Property, plant, and equipment are carried at cost. Depreciation is computed over useful lives

using the straight-line and declining balance methods predominately over 15 years for buildings,

10 years for machinery and equipment and 3 years for tools and dies. When assets are retired, sold

or otherwise disposed of, their gross carrying values and related accumulated depreciation are

removed from the accounts and a gain or loss on such disposals is recognized when appropriate.

Maintenance and repairs are charged to operations; replacements and improvements are

capitalized.

Long-lived Assets

The Company evaluates the carrying value of long-lived assets to be held and used when events

or changes in circumstances indicate the carrying value may not be recoverable. In performing

this review, the carrying value of the assets is compared to the projected undiscounted cash flows

to be generated from the assets. If the sum of the undiscounted expected future cash flows is less

than the carrying value of the assets, the assets are considered to be impaired. Impairment losses

are measured as the amount by which the carrying value of the assets exceeds their fair value. The

Company bases fair value of the assets on quoted market prices if available or, if not available,

quoted market prices of similar assets. Where quoted market prices are not available, the

Company estimates fair value using the estimated future cash flows generated by the assets

discounted at a rate commensurate with the risks associated with the recovery of the assets.

52

Equity Method Investments

Investee companies that are not consolidated, but over which the Company exercises significant

influence, are accounted for under the equity method of accounting. Under the equity method of

accounting, an investee company’s accounts are not reflected within the Company’s Balance

Sheets and Statements of Income; however, the Company’s share of the earnings or losses of the

investee company is reflected in ‘‘Other operating (income) expenses, net’’ in the Statements of

Income. The Company’s carrying value in an investee company is reflected in ‘‘Other assets’’ in

the Company’s Balance Sheets.

Cost Method Investments

Investee companies not accounted for under the consolidation or the equity method of accounting

are accounted for under the cost method of accounting. Under this method, the Company’s share

of the earnings or losses of such Investee companies is not included in the Balance Sheet or

Statement of Income. However, impairment charges are recognized in the Statement of Income.

Income Taxes

Income taxes are accounted for using the asset and liability method. Under this method, deferred

income taxes are recognized for the tax consequences of “temporary differences” by applying

enacted statutory rates applicable to future years to temporary differences between the financial

statement carrying amounts and the tax basis of the Company’s assets and liabilities.

Product Liability

The Company provides for product liability claims including estimated legal costs to be incurred

defending such claims. The provision for product liability claims is charged to cost of products

sold.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expenses for 2012, 2011, and

2010, were $3.4 million, $2.9 million, and $2.3 million, respectively.

Shipping Costs

Costs incurred related to the shipment of products are included in selling expense. Such costs

totaled $5.6 million, $3.5 million, and $3.0 million in 2012, 2011, and 2010, respectively.

Research and Development

In 2012, 2011, and 2010, the Company spent approximately $5.9 million, $4.0 million, and $3.2

million, respectively, on research activities relating to the development of new products and the

improvement of existing products. Research and development costs are expensed as incurred.

53

Earnings per Share

Basic earnings per share is based upon the weighted-average number of shares of common stock

outstanding during the year. Diluted earnings per share reflect the impact of options, restricted

stock units, and deferred stock outstanding using the treasury stock method.

2. Trade Receivables, Net

Trade receivables consist of the following:

December 31, 2012 2011

Trade receivables $44,143 $43,217

Allowance for doubtful accounts (300) (185)

Allowance for discounts (825) (807)

$43,018 $42,225

In 2012, the largest individual trade receivable balances accounted for 17%, 14%, 11%, and 10%

of total trade receivables, respectively.

In 2011, the largest individual trade receivable balances accounted for 19%, 15%, 14%, and 12%

of total trade receivables, respectively.

3. Inventories

Inventories consist of the following:

December 31, 2012 2011

Finished goods $ 3,615 $ 4,071

Materials and products in process 50,483 43,622

54,098 47,693

Adjustment of inventories to a LIFO basis (38,089) (37,476)

$16,009 $10,217

54

4. Property, Plant and Equipment

Property, plant and equipment consist of the following:

December 31, 2012 2011

Land and improvements $ 1,308 $ 1,266

Buildings and improvements 29,539 27,961

Machinery and equipment 133,635 111,558

Dies and tools 31,231 28,357

$195,713 $169,142

5. Other Assets

Other assets consist of the following:

December 31, 2012 2011

Patents, at cost $5,021 $4,900

Accumulated amortization (2,826) (2,583)

Deposits on capital items 3,934 1,618

Software development costs, at cost 2,057 2,057

Accumulated amortization (498) (146)

Investment in equity securities, carried at cost 125 969

Investment in equity securities, equity method 1,206 -

Other 549 474

$9,568 $7,289

The capitalized cost of patents is amortized using the straight-line method over their useful lives.

The cost of patent amortization was $0.2 million in each 2012, 2011, and 2010. The estimated

annual patent amortization cost for each of the next five years is $0.2 million. Costs incurred to

maintain existing patents are charged to expense in the year incurred.

Software development costs were incurred to develop and implement an integrated ERP system

prior to the time the system became operational. These costs are being amortized using the

straight line method over a period of sixty months. Costs incurred subsequent to the system

becoming operational are being expensed. The cost of software development cost amortization

was $0.4 million and $0.1 million in 2012 and 2011, respectively. There was no amortization for

software development costs in 2010.

The investment in equity securities carried at cost was evaluated for impairment as of December

31, 2012 and it was determined that the investment has been impaired and that the impairment is

other than temporary. As a result, the Company recognized an impairment loss of $1.1 million in

2012.

The investment in equity securities accounted for on the equity method of accounting consists of a

29% interest in a crossbow manufacturer. The Company recognized an immaterial loss related to

this investment in 2012 and did not receive any dividends from this investment in 2012.

55

6. Trade Accounts Payable and Accrued Expenses

Trade accounts payable and accrued expenses consist of the following:

December 31, 2012 2011

Trade accounts payable $13,387 $12,263

Accrued expenses 25,113 16,329

$38,500 $28,592

7. Line of Credit

In December 2007, the Company established an unsecured $25 million revolving line of credit

with a bank. This facility is renewable annually. The credit facility remained unused throughout

2011 and 2012. Borrowings under this facility would bear interest at LIBOR (0.843% at

December 31, 2012) plus 200 basis points and the Company is charged three-eighths of a percent

(0.375%) per year on the unused portion. At December 31, 2012 and 2011, the Company was in

compliance with the terms and covenants of the credit facility.

In February 2013, the Company amended its credit facility to increase the availability to $40

million and extend the expiration date from June 15, 2013 to June 15, 2014.

8. Employee Benefit Plans

The Company has migrated its retirement benefits from defined-benefit pension plans to defined-

contribution retirement plans, utilizing its current 401(k) plan. The Company sponsored two

qualified defined-benefit pension plans that covered substantially all employees. A third defined-

benefit pension plan is non-qualified and covered certain executive officers of the Company. The

Company also sponsors a defined-contribution 401(k) plan that covers substantially all

employees.

Defined-Benefit Plans

In 2007, the Company amended its hourly and salaried defined-benefit pension plans so that

employees no longer accrued benefits under them after December 31, 2007. This action “froze”

the benefits for all employees and prevented future hires from joining the plans, effective

December 31, 2007. Currently, the Company provides supplemental discretionary contributions

to substantially all employees’ individual 401(k) accounts.

Minimum contributions of $2.6 million were required for the defined-benefit plans for 2012. The

Company contributed $3 million and $2 million in 2012 and 2011, respectively.

In future years, the Company may again be required to make cash contributions to the two

defined-benefit pension plans. The annual contributions will be based on the amount of the

unfunded plan liabilities derived from the frozen benefits and will not include liabilities for any

future accrued benefits for any new or existing participants. The total amount of these future cash

contributions will depend on the investment returns generated by the plans’ assets and the then-

applicable discount rates used to calculate the plans’ liabilities.

56

The Company plans to contribute approximately $3 million in 2013, but will increase the amount

of the contribution if required to do so. The intent of these contributions is to reduce the amount

of time that the Company will be required to continue to operate the frozen plans. The ongoing

cost of running the plans (even if frozen) is approximately $0.4 million per year, which includes

PBGC premiums, actuary and audit fees, and other expenses.

The measurement dates of the assets and liabilities of all plans presented for 2012 and 2011 were

December 31, 2012 and December 31, 2011, respectively.

Summarized information on the Company’s defined-benefit pension plans is as follows:

Obligations and Funded Status at December 31, 2012 2011

Change in Benefit Obligation

Benefit obligation at beginning of year $77,230 $ 68,793

Service cost - -

Interest cost 3,574 3,545

Actuarial loss 7,745 7,662

Benefits paid (3,033) (2,770)

Benefit obligation at end of year 85,516 77,230

Change in Plan Assets

Fair value of plan assets at beginning of year 58,148 59,423

Actual return on plan assets 7,619 (661)

Employer contributions 3,156 2,156

Benefits paid (3,033) (2,770)

Fair value of plan assets at end of year 65,890 58,148

Funded Status

Funded status (19,626) (19,082)

Unrecognized net actuarial loss 47,016 43,719

Unrecognized prior service cost - -

Net amount recognized $ 27,390 $ 24,637

Weighted Average Assumptions for the years

ended December 31,

2012

2011

Discount rate 4.75% 5.25%

Expected long-term return on plan assets 8.00% 8.00%

Rate of compensation increases N/A N/A

57

Components of Net Periodic Pension Cost 2012 2011

Service cost $ - $ -

Interest cost 3,574 3,545

Expected return on assets (4,650) (4,738)

Recognized gains 1,481 1,034

Prior service cost recognized - -

Net periodic pension cost $405 $ (159)

Amounts Recognized on the Balance Sheet 2012 2011

Accrued benefit liability $(19,626) $(19,082)

Accumulated other comprehensive loss, net of tax 29,620 27,543

Deferred tax asset 17,396 16,176

$27,390 $24,637

Weighted Average Assumptions as of December 31, 2012 2011

Discount rate 4.00% 4.75%

Rate of compensation increases N/A N/A

Information for Pension Plans with an Accumulated Benefit

Obligation in excess of plan assets

2012

2011

Projected benefit obligation $85,516 $77,230

Accumulated benefit obligation $85,516 $77,230

Fair value of plan assets $65,890 $58,148

Pension Weighted Average Asset Allocations as of December 31,

2012

2011

Debt securities 25% 27%

Equity securities 69% 67%

Real estate 5% 5%

Money market funds 1% 1%

100% 100%

The estimated future benefit payments for the defined-benefit plans for each of the next five years

and the total amount for years six through ten, are as follows: 2013-$3.4 million, 2014-$3.6

million, 2015-$3.8 million, 2016-$4.0 million, 2017-$4.1 million and for the five year period

ending 2021-$22.7 million.

The Company determines the expected return on plan assets based on the target asset allocations.

In addition, the historical returns of the plan assets are also considered in arriving at the expected

rate of return.

The Company recorded an additional minimum pension liability adjustment, net of tax, which

decreased comprehensive income by $2.1 million and $7.9 million in 2012 and 2011 and

increased comprehensive income by $0.7 million in 2010, respectively.

58

Plan Assets

The current investment objective is to produce income and long-term appreciation through a

target asset allocation of 35% debt securities and other fixed income investments including cash

and short-term instruments, and 65% equity investments, to provide for the current and future

benefit payments of the plans. The pension plans are not invested in the common stock of the

Company.

The Company adopted the provisions of the Financial Accounting Standard Board’s Accounting

Standards Codification 821.10 (“ASC 820.10”) which defines fair value, establishes a framework

for measuring fair value in generally accepted accounting principles, and expands disclosures

about fair value measurements. The Company has determined that all financial assets of both its

defined-benefit pension plans are level 2 in the fair value hierarchy established by ASC 820.10.

The valuation of level 2 assets are based on inputs, other than quoted prices in active markets, that

are either directly or indirectly observable for the assets.

The disclosures focus on the inputs used to measure fair value. The following is a description of

the valuation methodologies used to measure the plans’ assets at fair value:

Pooled separate accounts: Valued at the net asset value (“NAV”) of units held by the plans at

year end, which is determined by aggregating the quoted market values of the underlying assets.

Money market funds: Valued at the NAV of shares held by the plans at year end, which is

generally intended to equal one dollar per share.

The following table sets forth the defined-benefit plans’ assets at fair value:

December 31,

2012

2011 Pooled separate accounts:

Equity securities:

U.S. small cap equity funds $ 7,637 $ 6,742

U.S. mid-cap equity funds 18,626 16,037

U.S. large-cap equity funds 5,848 5,236

International equity funds 13,083 11,229

Domestic real estate funds 3,640 3,136

Fixed income securities:

Corporate bond funds 16,510 15,459

Money market fund 546 309

$65,890 $58,148

Defined-Contribution Plans

Prior to 2007, the Company also sponsored two qualified defined-contribution plans that covered

substantially all of its hourly and salaried employees. Effective January 1, 2007, the qualified

defined-contribution plans were merged into a single 401(k) plan. Under the terms of the 401(k)

plan, the Company matches a certain portion of employee contributions. Expenses related to

59

matching employee contributions to the 401(k) plan were $2.3 million, $2.0 million, and $1.8

million in 2012, 2011, and 2010, respectively.

Additionally, in 2012, 2011, and 2010 the Company provided supplemental discretionary

contributions to the individual 401(k) accounts of substantially all employees. Each employee

received a supplemental contribution to their account based on a uniform percentage of qualifying

compensation established annually. The cost of these supplemental contributions totaled $3.3

million, $2.1 million, and $1.8 million in 2012, 2011, and 2010, respectively.

Non-Qualified Plan

The Company also sponsors a non-qualified defined-contribution plan, the Supplemental

Executive Retirement Plan, which covered certain of its salaried employees. Only one

participant, who is retired, remains in this plan.

9. Other Operating Expenses (Income), net

Other operating expenses (income), net consist of the following:


(Gain) loss on sale of operating assets $ (27) $ (83) $ 22

Frozen defined-benefit pension plan expense

(income)

320

(236)

398

Total other operating expenses (income), net $293 $(319) $420

10. Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and various state

jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state

income tax examinations by tax authorities for years before 2008.

The federal and state income tax provision consisted of the following:


Current Deferred Current Deferred Current Deferred

Federal $34,941 $ (327) $11,371 $7,948 $11,675 $1,112

State 6,635 231 3,926 256 2,814 293

$41,576 $ (96) $15,297 $8,204 $14,489 $1,405

The effective income tax rate varied from the statutory federal income tax rate as follows:


Statutory federal income tax rate 35.0% 35.0% 35.0%

State income taxes, net of federal tax benefit 4.0 4.3 4.6

Domestic production activities deduction (3.0) (1.8) (2.7)

Other items 1.0 (0.5) (0.9)

Effective income tax rate 37.0% 37.0% 36.0%

60

Significant components of the Company’s deferred tax assets and liabilities are as follows:

December 31, 2012 2011

Deferred tax assets:

Product liability $ 391 $ 646

Employee compensation and benefits 3,343 3,374

Allowances for doubtful accounts and discounts 1,123 1,625

Inventories 688 533

Additional minimum pension liability 17,396 16,176


Other 859 259

Total deferred tax assets 25,916 23,702

Deferred tax liabilities:

Pension plans 10,205 9,217

Depreciation 8,069 8,401

Other 354 276

Total deferred tax liabilities 18,628 17,894

Net deferred tax assets $7,288 $ 5,808

Changes in deferred tax assets relating to the additional minimum pension liability are not

charged to expense and are therefore not included in the deferred tax provision; instead they are

charged to other comprehensive income.

The Company made income tax payments of approximately $33.0 million, $16.4 million, and

$14.6 million, during 2012, 2011, and 2010, respectively. The Company expects to realize its

deferred tax assets through tax deductions against future taxable income or carry back against

taxes previously paid.

The Company does not believe it has included any “uncertain tax positions” in its federal income

tax return or any of the state income tax returns it is currently filing. The Company has made an

evaluation of the potential impact of additional state taxes being assessed by jurisdictions in

which the Company does not currently consider itself liable. The Company does not anticipate

that such additional taxes, if any, would result in a material change to its financial position.

61

11. Earnings Per Share

Set forth below is a reconciliation of the numerator and denominator for basic and diluted

earnings per share calculations for the periods indicated:


Numerator:

Net income $70,629 $40,015 $28,255

Denominator:

Weighted average number of common shares

outstanding – Basic

19,160,849

18,919,489

19,032,557

Dilutive effect of options and restricted stock

units outstanding under the Company’s

employee compensation plans

474,392

232,909

266,636

Weighted average number of common shares

outstanding – Diluted

19,635,241

19,152,398

19,299,193

The dilutive effect of outstanding options and restricted stock units is calculated using the treasury

stock method. The weighted average number of common shares outstanding decreased from the

previous year in 2011 and 2010 as a result of the Company’s stock repurchase plans, which were

authorized by the Board of Directors in 2008 and 2010. See Note 12 for further information.

There are no anti-dilutive stock options in 2012, 2011, and 2010 because the closing price of the

Company’s stock on December 31, 2012, 2011, and 2010 exceeded the strike price of all

outstanding options on that date.

12. Stock Repurchases

In the third quarter of 2010 and the first quarter of 2011 the Company repurchased shares of its

common stock. Details of these purchases are as follows:

Period

Total

Number of

Shares

Purchased

Average

Price Paid

per Share

Total

Number of

Shares

Purchased

as Part of

Publicly

Announced

Program

Maximum

Dollar

Value of

Shares that

May Yet Be

Purchased

Under the

Program

8/3/10-8/31/10 339,000 $14.08 339,000

9/1/10-9/22/10 73,000 $12.92 73,000

1/4/11-1/29/11 133,400 $14.94 133,400

Total 545,400 $14.15 545,400 $8,000,000

All of these purchases were made with cash held by the Company and no debt was incurred.

At December 31, 2012, $8.0 million remained authorized for share repurchases.

62

13. Compensation Plans

On December 18, 2000, the Company adopted, and in May 2001 the shareholders approved, the

2001 Stock Option Plan for Non-Employee Directors (the “2001 Plan”) under which non-

employee directors were granted options to purchase shares of the Company’s authorized but

unissued stock. The Company reserved 200,000 shares for issuance under the 2001 Plan. In

April 2007, all reserved shares for which a stock option had not been granted under the 2001 Plan

were deregistered. No further stock options or stock will be granted under the 2001 Plan.

In April 2007, the Company adopted and the shareholders approved the 2007 Stock Incentive

Plan (the “2007 SIP”) under which employees, independent contractors, and non-employee

directors may be granted stock options, restricted stock, deferred stock awards, restricted stock

units (“RSU’s”), and stock appreciation rights, any of which may or may not require the

achievement of performance objectives. Vesting requirements are determined by the

Compensation Committee of the Board of Directors. The Company reserved 2,550,000 shares for

issuance under the 2007 SIP. At December 31, 2012, an aggregate of 830,000 shares remain

available for grant under the Plan.

Compensation expense related to stock options is recognized based on the grant-date fair value of

the awards estimated using the Black-Scholes option pricing model. Compensation expense

related to deferred stock, restricted stock, and restricted stock units is recognized based on the

grant-date fair value of the Company’s common stock. The total stock-based compensation cost

included in the Statements of Income was $4.7 million, $3.0 million, and $2.6 million in 2012,

2011, and 2010, respectively.

Stock Options

For purposes of determining the fair value of stock option awards granted, the Company used the

Black-Scholes option pricing model and the assumptions set forth in the table below.

2012 2010

Dividend yield 2.9% 0.0%

Expected volatility 44.2% 40.0%

Risk free rate of return 4.0% 4.0%

Expected lives 2.9 years 6.7 years

The estimated fair value of options granted is subject to the assumptions made and if the

assumptions changed, the estimated fair value amounts could be significantly different.

63

The following table summarizes the stock option activity of the Plans:

Shares

Weighted

Average

Exercise

Price

Weighted

Average

Grant Date

Fair Value

Weighted

Average

Remaining

Contractual

Life (Years)

Outstanding at December 31, 2009 1,498,150 $9.00 $4.13 7.1

Granted 40,000 9.70 4.80 9.0

Exercised (366,000) 8.11 3.15 4.5

Canceled - - - -

Outstanding at December 31, 2010 1,172,150 9.30 4.46 6.7

Granted - - - -

Exercised (843,450) 9.58 4.48 5.0

Canceled - - - -

Outstanding at December 31, 2011 328,700 8.58 4.42 6.2

Granted 9,830 8.59 32.57 5.6

Exercised (217,820) 7.92 4.40 4.8

Canceled (250) 8.69 4.57 6.3

Outstanding at December 31, 2012 120,460 8.58 6.76 5.7

Exercisable Options Outstanding at

December 31, 2012

52,583

8.65

6.97

5.4

Non-Vested Options Outstanding at

December 31, 2012

67,877

$9.22

$6.81

5.6

At December 31, 2012, the aggregate intrinsic value of all options, including exercisable options,

was $4.4 million.

At December 31, 2012, there was $0.2 million of unrecognized compensation cost related to stock

options that is expected to be recognized over a weighted-average period of 1.2 years.

Deferred Stock

Deferred stock awards vest based on the passage of time or the Company’s attainment of

performance objectives. Upon vesting, these awards convert one-for-one to common stock.

In 2012, 4,542 deferred stock awards were issued to non-employee directors that will vest in April

2013 and 6,102 deferred stock awards were issued to non-employee directors that will vest in

April 2015.

In 2011, 9,487 deferred stock awards were issued to non-employee directors that vested in April


April 2014.

In 2010, 12,902 deferred stock awards were issued to non-employee directors that vested in April


April 2013.

64

Compensation expense related to these awards is amortized ratably over the vesting period.

Compensation expense related to these awards was $0.5 million, $0.5 million and $0.3 million in

2012, 2011, and 2010, respectively.

Restricted Stock Units

Beginning in the second quarter of 2009, the Company began granting restricted stock units in

lieu of incentive stock options to senior employees. These RSU’s have a vesting “double trigger.”

The vesting of these RSU’s is dependent on the achievement of corporate objectives established

by the Compensation Committee of the Board of Directors and the passage of time.

During 2012, 139,000 restricted stock units were issued. Compensation costs related to these

restricted stock units was $6.2 million, of which $1.2 million was recognized in 2012. The

remaining costs will be recognized ratably over the remaining period required before the units to

vest, which ranges from two to four years.


restricted stock units was $10.7 million, of which $2.5 million and $1.8 million was recognized in

2012 and 2011, respectively. The remaining costs will be recognized ratably over the remaining

period required before the units to vest, which ranges from one to three years.


restricted stock units was $1.1 million, all of which was recognized in 2010 because the

performance objectives were attained and the awards became fully vested.

14. Operating Segment Information

The Company has two reportable operating segments: firearms and investment castings. The

firearms segment manufactures and sells rifles, pistols, and revolvers principally to a number of

federally-licensed, independent wholesale distributors primarily located in the United States. The

investment castings segment manufactures and sells steel investment castings.

Corporate segment income relates to interest income on short-term investments, the sale of non-

operating assets, and other non-operating activities. Corporate segment assets consist of cash and

short-term investments and other non-operating assets.

65

The Company evaluates performance and allocates resources, in part, based on profit and loss

before taxes. The accounting policies of the reportable segments are the same as those described

in the summary of significant accounting policies (see Note 1). Intersegment sales are recorded at

the Company’s cost plus a fixed profit percentage.

Year ended December 31, 2012 2011 2010 Net Sales

Firearms $ 484,933 $324,200 $251,680

Castings

Unaffiliated 6,891 4,616 3,526

Intersegment 26,462 18,122 14,677

33,353 22,738 18,203

Eliminations (26,462) (18,122) (14,677)

$ 491,824 $328,816 $255,206

Income (Loss) Before Income Taxes

Firearms $ 113,660 $ 66,484 $ 48,160

Castings (1,858) (2,254) (1,637)

Corporate 307 (714) (2,374)

$ 112,109 $ 63,516 $ 44,149

Identifiable Assets

Firearms $ 120,879 $103,545 $ 82,179

Castings 6,467 5,290 4,683

Corporate 47,140 97,675 70,899

$ 174,486 $206,510 $157,761

Depreciation

Firearms $ 13,413 $11,373 $ 8,502

Castings 823 775 705

$14,236 $12,148 $ 9,207

Capital Expenditures

Firearms $ 26,773 $20,719 $ 18,904

Castings 509 1,416 505

$ 27,282 $ 22,135 $ 19,409


follows: Davidson’s-17%; Jerry’s/Ellett Brothers-14%; Lipsey’s-13%; and Sports South-12%


follows: Jerry’s/Ellett Brothers-15%; Davidson’s-14%; Sports South-12%; and Lipsey’s-12%.


follows: Jerry’s/Ellett Brothers-16%; Davidson’s-12%; Lipsey’s-11%; and Sports South-11%.

The Company’s assets are located entirely in the United States and domestic sales represent

greater than 94% of total sales in 2012, 2011, and 2010.

66

15. Quarterly Results of Operations (Unaudited)

The following is a tabulation of the unaudited quarterly results of operations for the two years

ended December 31, 2012:

Three Months Ended

3/31/12 6/30/12 9/29/12 12/31/12 Net Sales $112,337 $119,569 $118,152 $141,766

Gross profit 41,793 45,134 42,565 49,461

Net income 15,480 18,014 17,349 19,786

Basic earnings per share 0.81 0.94 0.91 1.03

Diluted earnings per share $0.79 $0.91 $0.88 $1.00

Three Months Ended

4/02/11 7/02/11 10/01/11 12/31/11 Net Sales $75,441 $79,622 $80,512 $93,241

Gross profit 23,995 28,465 29,127 30,172

Net income 7,947 10,813 10,737 10,518

Basic earnings per share 0.42 0.57 0.57 0.55

Diluted earnings per share $0.42 $0.56 $0.56 $0.54

16. Contingent Liabilities

As of December 31, 2012, the Company was a defendant in approximately two (2) lawsuits and

was aware of certain other such claims. Lawsuits in which the Company is involved generally

fall into one of three categories: traditional product litigation, municipal litigation, and

commercial litigation, discussed in turn below.

Traditional Product Liability Litigation

One of the two lawsuits mentioned above involves claims for damages related to allegedly

defective product design and/or manufacture and/or inadequate warnings. The lawsuit stems from

a specific incident of personal injury and is based on traditional product liability theories such as

strict liability, negligence and/or breach of warranty. The Company management believes that the

allegations in this case are unfounded, and that the incident was caused by the negligence and/or

misuse of the firearm by third parties or the claimant, and that there should be no recovery against

the Company.

Municipal Litigation

Municipal litigation generally includes those cases brought by cities or other governmental

entities and individuals against firearms manufacturers, distributors and retailers seeking to

recover damages allegedly arising out of the misuse of firearms by third-parties in the

commission of homicides, suicides and other shootings involving juveniles and adults.

The only remaining lawsuit of this type was filed by the City of Gary in Indiana State Court over

ten years ago. The complaint seeks damages, among other things, for the costs of medical care,

67

police and emergency services, public health services, and other services as well as punitive

damages. In addition, nuisance abatement and/or injunctive relief is sought to change the design,

manufacture, marketing, and distribution practices of the various defendants. The suit alleges,

among other claims, negligence in the design of products, public nuisance, negligent distribution

and marketing, negligence per se and deceptive advertising. The case does not allege a specific

injury to a specific individual as a result of the misuse or use of any of the Company’s products.

After a long procedural history, the case was scheduled for trial on June 15, 2009. The case was

not tried on that date and no subsequent scheduling order was entered. There has been no activity

since that time.

Commercial Litigation

From time to time, the Company may be involved in commercial disputes that result in litigation.

These disputes run the gamut and may involve intellectual property, real property, supply or

distribution agreements, contract disputes, or other, general commercial matters. As of December

31, 2012, the Company was not involved in any such lawsuits.

Summary of Claimed Damages and Explanation of Product Liability Accruals

Punitive damages, as well as compensatory damages, are demanded in certain of the lawsuits and

claims. Aggregate claimed amounts presently exceed product liability accruals and applicable

insurance coverage. For claims made after July 10, 2000, coverage is provided on an annual basis

for losses exceeding $5 million per claim, or an aggregate maximum loss of $10 million annually,

except for certain new claims which might be brought by governments or municipalities after July

10, 2000, which are excluded from coverage.

The Company management monitors the status of known claims and the product liability accrual,

which includes amounts for asserted and unasserted claims. While it is not possible to forecast

the outcome of litigation or the timing of costs, in the opinion of management, after consultation

with special and corporate counsel, there is a remote likelihood that litigation, including punitive

damage claims, will have a material adverse effect on the financial position of the Company, but

may have a material impact on the Company’s financial results for a particular period.

Product liability claim payments are made when appropriate if, as, and when claimants and the

Company reach agreement upon an amount to finally resolve all claims. Legal costs are paid as

the lawsuits and claims develop, the timing of which may vary greatly from case to case. A time

schedule cannot be determined in advance with any reliability concerning when payments will be

made in any given case.

Provision is made for product liability claims based upon many factors related to the severity of

the alleged injury and potential liability exposure, based upon prior claim experience. Because

our experience in defending these lawsuits and claims is that unfavorable outcomes are typically

not probable or estimable, only in rare cases is an accrual established for such costs. In most

cases, an accrual is established only for estimated legal defense costs. Product liability accruals

are periodically reviewed to reflect then-current estimates of possible liabilities and expenses

incurred to date and reasonably anticipated in the future. Threatened product liability claims are

reflected in our product liability accrual on the same basis as actual claims; i.e., an accrual is

68

made for reasonably anticipated possible liability and claims-handling expenses on an ongoing

basis.

A range of reasonably possible loss relating to unfavorable outcomes cannot be made. However,

in product liability cases in which a dollar amount of damages is claimed, the amount of damages

claimed, which totaled $0.0 million and $5.4 million at December 31, 2012 and 2011,

respectively, are set forth as an indication of possible maximum liability that the Company might

be required to incur in these cases (regardless of the likelihood or reasonable probability of any or

all of this amount being awarded to claimants) as a result of adverse judgments that are sustained

on appeal.

As of December 31, 2012 and 2011, the Company was a defendant in 2 and 3 lawsuits,

respectively, involving its products and is aware of other such claims. During 2012 and 2011,

respectively, 2 and 1 claims were filed against the Company, 3 and 0 claims were dismissed, and

no claims were settled in either year.

The Company’s product liability expense was $0.2 million in 2012 and $1.6 million in 2011.

This expense includes the cost of outside legal fees, insurance, and other expenses incurred in the

management and defense of product liability matters.

69

A roll-forward of the product liability reserve and detail of product liability expense for the three years ended December 31, 2012 follows: Balance Sheet Roll-forward for Product Liability Reserve Cash Payments

Balance Beginning of Year (a)

Accrued Legal

Expense (Income)

(b)

Legal Fees (c)

Settlements (d)

Balance End of

Year (a) 2010 2,082 (834) (64) (162) 1,022 2011 1,022 755 (31) - 1,746 2012 1,746 (633) (52) (4) 1,057

Income Statement Detail for Product Liability Expense

Accrued

Legal Expense

(b)

Insurance Premium Expense

(e)

Total Product Liability Expense

2010 (834) 843 9 2011 755 862 1,617 2012 (633) 810 177

Notes

(a) The beginning and ending liability balances represent accrued legal fees only. Settlements

and administrative costs are expensed as incurred. Only in rare instances is an accrual

established for settlements.

(b) The expense accrued in the liability is for legal fees only. In 2010 and 2012, the costs

incurred related to cases that were settled or dismissed were less than the amounts accrued

for these cases in prior years.

(c) Legal fees represent payments to outside counsel related to product liability matters.

(d) Settlements represent payments made to plaintiffs or allegedly injured parties in exchange

for a full and complete release of liability.

(e) Insurance expense represents the cost of insurance premiums.

There were no insurance recoveries during any of the above years.

70

17. Financial Instruments

The Company does not hold or issue financial instruments for trading or hedging purposes, nor

does it hold interest rate, leveraged, or other types of derivative financial instruments. Fair values

of accounts receivable, accounts payable, accrued expenses and income taxes payable reflected in

the December 31, 2012 and 2011 balance sheets approximate carrying values at those dates.

18. Subsequent Events

On February 11, 2013, the Company’s Board of Directors authorized a dividend of 40.4¢ per

share to shareholders of record on March 8, 2013.

The Company’s management has evaluated transactions occurring subsequent to December 31,

2012 and determined that there were no events or transactions during that period that would have

a material impact on the Company’s results of operations or financial position.

ITEM 9—CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None. ITEM 9A—CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company conducted an evaluation, with the participation of its Chief Executive Officer and

Chief Financial Officer, of the effectiveness of the design and operation of the Company’s

disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the

Securities Exchange Act of 1934, as amended, as of December 31, 2012. Based upon that

evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of

December 31, 2012, the Company’s disclosure controls and procedures over financial reporting

were effective.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal

control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities

Exchange Act of 1934. Because of its inherent limitations, internal control over financial

reporting may not prevent or detect misstatements. Also, projections of any evaluation of

effectiveness to future periods are subject to the risk that controls may become inadequate

because of changes in conditions, or that the degree of compliance with the policies or procedures

may deteriorate.

The Company conducted an evaluation, with the participation of its Chief Executive Officer and

Chief Financial Officer, of the effectiveness of its internal control over financial reporting as of

December 31, 2012. This evaluation was performed based on the criteria established in “Internal

71

Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the

Treadway Commission (“COSO”).

Management has concluded that the Company maintained effective internal control over financial

reporting as of December 31, 2012, based on criteria established in “Internal Control —

Integrated Framework” issued by the COSO.

The effectiveness of the Company’s internal control over financial reporting as of December 31,

2012 has been audited by McGladrey LLP, an independent registered public accounting firm, as

stated in their report which is included in this Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our

most recently completed fiscal quarter that has materially affected, or is reasonably likely to

materially affect, our internal control over financial reporting. New York Stock Exchange Certification

Pursuant to Section 303A.12(a) of the New York Stock Exchange Listed Company Manual, the

Company submitted an unqualified certification of our Chief Executive Officer to the New York

Stock Exchange on May 15, 2007. The Company has also filed, as exhibits to this Annual Report

on Form 10-K, the Chief Executive Officer and Chief Financial Officer Certifications required

under the Sarbanes-Oxley Act of 2002. ITEM 9B—OTHER INFORMATION

None.

72

PART III ITEM 10—DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information concerning the Company’s directors, including the Company’s separately designated standing audit committee, and on the Company’s code of business conduct and ethics required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the 2013 Annual Meeting of Stockholders scheduled to be held April 30, 2013. Information concerning the Company’s executive officers required by this Item is set forth in Item 1 of this Annual Report on Form 10-K under the caption “Executive Officers of the Company.” Information concerning beneficial ownership reporting compliance required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the 2013 Annual Meeting of Stockholders scheduled to be held April 30, 2013. ITEM 11—EXECUTIVE COMPENSATION Information concerning director and executive compensation required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the 2013 Annual Meeting of Stockholders scheduled to be held April 30, 2013.

ITEM 12—SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information concerning the security ownership of certain beneficial owners and management and related stockholder matters required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the 2013 Annual Meeting of Stockholders scheduled to be held April 30, 2013. ITEM 13—CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND

DIRECTOR INDEPENDENCE Information concerning certain relationships and related transactions required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the 2013 Annual Meeting of Stockholders scheduled to be held April 30, 2013. ITEM 14—PRINCIPAL ACCOUNTANT FEES AND SERVICES Information concerning the Company’s principal accountant fees and services and the pre-approval policies and procedures of the audit committee of the board of directors required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the 2013 Annual Meeting of Stockholders scheduled to be held April 30, 2013.

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PART IV ITEM 15—EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits and Financial Statement Schedules

(1) Financial Statements can be found under Item 8 of Part II of this Form 10-K

(2) Schedules can be found on Page 84 of this Form 10-K

(3) Listing of Exhibits:

Exhibit 3.1 Certificate of Incorporation of the Company, as amended (Incorporated by reference to Exhibits 4.1 and 4.2 to the Form S-3 Registration Statement previously filed by the Company File No. 33-62702).

Exhibit 3.2 Bylaws of the Company, as amended.

Exhibit 3.3 Amended and restated Article 3, Section 2 of Bylaws

(Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 24, 2007).

Exhibit 3.4 Amended and restated Article 3, Section 4 and Article 4,

Section 5 of Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 24, 2007).

Exhibit 3.5 Amended and restated Bylaws (Incorporated by reference to

Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 26, 2007).


Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 25, 2008).

Exhibit 3.7 Amendment to Article 5, Section 1 of Bylaws (Incorporated by

reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 6, 2009).

Exhibit 10.1 Sturm, Ruger & Company, Inc. 1986 Stock Bonus Plan

(Incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1988, as amended by Form 8 filed March 27, 1990, SEC File No. 1-10435).

Exhibit 10.2 Amendment to Sturm, Ruger & Company, Inc. 1986 Stock

Bonus Plan (Incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1991, SEC File No. 1-10435).

74

Exhibit 10.3 Sturm, Ruger & Company, Inc. Supplemental Executive Profit Sharing Retirement Plan (Incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1991, SEC File No. 1-10435).

Exhibit 10.4 Agreement and Assignment of Lease dated September 30, 1987

by and between Emerson Electric Co. and Sturm, Ruger & Company, Inc. (Incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1991, SEC File No. 1-10435).

Exhibit 10.5 Sturm, Ruger & Company, Inc. Supplemental Executive

Retirement Plan (Incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1995, SEC File No. 1-10435).

Exhibit 10.6 [Intentionally omitted.]

Exhibit 10.7 Sturm, Ruger & Company, Inc. 1998 Stock Incentive Plan.

(Incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998, SEC File No. 1-10435).

Exhibit 10.8 Sturm, Ruger & Company, Inc. 2001 Stock Option Plan for

Non-Employee Directors (Incorporated by reference to Exhibit 4 to the Form S-8 Registration Statement filed by the Company File No. 33-53234).

Exhibit 10.9 Agreement and Release, dated as of February 28, 2006, by and

between Sturm, Ruger & Company, Inc. and William B. Ruger (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 4, 2006, SEC File No. 1-10435).

Exhibit 10.10 Sale and Purchase Agreement, dated as of September 26, 2006,

by and between Sturm, Ruger & Company, Inc. and Ruger Business Holdings, L.P. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 26, 2006, SEC File No. 1-10435).

Exhibit 10.11 Severance Agreement, dated as of September 21, 2006, by and

between Sturm, Ruger & Company, Inc. and Stephen L. Sanetti (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 27, 2006, SEC File No. 1-10435).


between Sturm, Ruger & Company, Inc. and Thomas A. Dineen (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 27, 2006, SEC File No. 1-10435).

75


between Sturm, Ruger & Company, Inc. and Robert R. Stutler (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on September 27, 2006, SEC File No. 1-10435).

Exhibit 10.14 Offer Letter, dated as of September 5, 2006, by and between

Sturm, Ruger & Company, Inc. and Michael O. Fifer (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 28, 2006, SEC File No. 1-10435).

Exhibit 10.15 Severance Agreement, dated as of December 15, 2006, by and

between Sturm, Ruger & Company, Inc. and Michael O. Fifer (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 19, 2006, SEC File No. 1-10435).


between Sturm, Ruger & Company, Inc. and Christopher John Killoy (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on December 19, 2006, SEC File No. 1-10435).

Exhibit 10.17 Amended Severance Agreement, dated as of December 15,

2006, by and between Sturm, Ruger & Company, Inc. and Thomas P. Sullivan (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on December 19, 2006, SEC File No. 1-10435).

Exhibit 10.18 Retention and Consultation Agreement, dated December 4,

2007, by and between Sturm, Ruger & Company, Inc. and Robert R. Stutler.

Exhibit 10.19 Credit Agreement, dated as of December 14, 2007, by and

between the Company and Bank of America (Incorporated by reference to Exhibit 10.18 to the Company's Current Report on Form 8-K filed with the SEC on December 20, 2007).

Exhibit 10.20 Severance Agreement, dated as of April 10, 2008, by and

between the Company and Michael O. Fifer (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).


between the Company and Thomas A. Dineen (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).


between the Company and Mark T. Lang (Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

76


between the Company and Christopher J. Killoy (Incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).


between the Company and Steven M. Maynard (Incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).


between the Company and Thomas P. Sullivan (Incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).


between the Company and Leslie M. Gasper (Incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

Exhibit 10.27 Agreement, dated as of April 10, 2008, by and between the

Company and Stephen L. Sanetti (Incorporated by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K/A filed with the SEC on April 30, 2008).

Exhibit 10.28 Severance Agreement, dated as of May 2, 2008 by and between

the Company and Kevin B. Reid, Sr. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on May 5, 2008).

Exhibit 10.29 First Amendment to Credit Agreement, dated as of December

15, 2008, by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on December 22, 2008).

Exhibit 10.30 Second Amendment to Credit Agreement, dated December 11, 2009, by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on December 21, 2009).

Exhibit 10.31 Fifth Amendment to Credit Agreement, dated February 14,

2013 by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on February 21, 2013).

Exhibit 23.1 Consent of McGladrey LLP

Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-

14(a) of the Exchange Act.

Exhibit 31.2 Certification of Treasurer and Chief Financial Officer Pursuant

to Rule 13a-14(a) of the Exchange Act.

77

Exhibit 32.1 Certification of the Chief Executive Officer Pursuant to Rule

13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2 Certification of the Treasurer and Chief Financial Officer Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 99.1 Item 1 LEGAL PROCEEDINGS from the Quarterly Report on

Form 10-Q of the Company for the quarter ended September 30, 1999, SEC File No. 1-10435, incorporated by reference in Item 3 LEGAL PROCEEDINGS.


Form 10-Q of the Company for the quarter ended June 30, 2012, SEC File No. 1-10435, incorporated by reference in Item 3 LEGAL PROCEEDINGS.

78

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. STURM, RUGER & COMPANY, INC. (Registrant) S/THOMAS A. DINEEN Thomas A. Dineen Principal Financial Officer Principal Accounting Officer, Vice President Treasurer and Chief Financial Officer February 27, 2013 Date Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. S/MICHAEL O. FIFER 2/27/13 Michael O. Fifer Chief Executive Officer, Director (Principal Executive Officer)

S/JOHN A. COSENTINO, JR. 2/27/13 John A. Cosentino, Jr. Director

S/JAMES E. SERVICE 2/27/13 James E. Service Director

S/RONALD C. WHITAKER 2/27/13 Ronald C. Whitaker Director

S/C. MICHAEL JACOBI 2/27/13 C. Michael Jacobi Director

S/PHILLIP C. WIDMAN 2/27/13 Phillip C. Widman Director

S/AMIR P. ROSENTHAL 2/27/13 Amir P. Rosenthal Director

S/THOMAS A. DINEEN 2/27/13 Thomas A. Dineen Principal Financial Officer, Principal Accounting Officer, Vice President, Treasurer and Chief Financial Officer

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EXHIBIT INDEX

Page No.

Exhibit 3.1 Certificate of Incorporation of the Company, as amended (Incorporated by reference to Exhibits 4.1 and 4.2 to the Form S-3 Registration Statement previously filed by the Company File No. 33-62702).

Exhibit 3.2 Bylaws of the Company, as amended.

Exhibit 3.3 Amended and restated Article 3, Section 2 of Bylaws

(Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 24, 2007).

Exhibit 3.4 Amended and restated Article 3, Section 4 and Article 4,

Section 5 of Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 24, 2007).


Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 26, 2007).


Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 25, 2008).

Exhibit 3.7 Amendment to Article 5, Section 1 of Bylaws (Incorporated by

reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 6, 2009).

Exhibit 10.1 Sturm, Ruger & Company, Inc. 1986 Stock Bonus Plan

(Incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1988, as amended by Form 8 filed March 27, 1990, SEC File No. 1-10435).

Exhibit 10.2 Amendment to Sturm, Ruger & Company, Inc. 1986 Stock

Bonus Plan (Incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1991, SEC File No. 1-10435).

Exhibit 10.3 Sturm, Ruger & Company, Inc. Supplemental Executive Profit

Sharing Retirement Plan (Incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1991, SEC File No. 1-10435).

Exhibit 10.4 Agreement and Assignment of Lease dated September 30, 1987

by and between Emerson Electric Co. and Sturm, Ruger & Company, Inc. (Incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1991, SEC File No. 1-10435).

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EXHIBIT INDEX (continued)

Exhibit 10.5 Sturm, Ruger & Company, Inc. Supplemental Executive Retirement Plan (Incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1995, SEC File No. 1-10435).

Exhibit 10.6 [Intentionally omitted.]

Exhibit 10.7 Sturm, Ruger & Company, Inc. 1998 Stock Incentive Plan.

(Incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998, SEC File No. 1-10435).

Exhibit 10.8 Sturm, Ruger & Company, Inc. 2001 Stock Option Plan for

Non-Employee Directors (Incorporated by reference to Exhibit 4 to the Form S-8 Registration Statement filed by the Company File No. 33-53234).

Exhibit 10.9 Agreement and Release, dated as of February 28, 2006, by and

between Sturm, Ruger & Company, Inc. and William B. Ruger (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 4, 2006, SEC File No. 1-10435).

Exhibit 10.10 Sale and Purchase Agreement, dated as of September 26, 2006,

by and between Sturm, Ruger & Company, Inc. and Ruger Business Holdings, L.P. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 26, 2006, SEC File No. 1-10435).


between Sturm, Ruger & Company, Inc. and Stephen L. Sanetti (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 27, 2006, SEC File No. 1-10435).


between Sturm, Ruger & Company, Inc. and Thomas A. Dineen (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 27, 2006, SEC File No. 1-10435).


between Sturm, Ruger & Company, Inc. and Robert R. Stutler (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on September 27, 2006, SEC File No. 1-10435).

Exhibit 10.14 Offer Letter, dated as of September 5, 2006, by and between

Sturm, Ruger & Company, Inc. and Michael O. Fifer (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 28, 2006, SEC File No. 1-10435).

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between Sturm, Ruger & Company, Inc. and Michael O. Fifer (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 19, 2006, SEC File No. 1-10435).


between Sturm, Ruger & Company, Inc. and Christopher John Killoy (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on December 19, 2006, SEC File No. 1-10435).

Exhibit 10.17 Amended Severance Agreement, dated as of December 15,

2006, by and between Sturm, Ruger & Company, Inc. and Thomas P. Sullivan (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on December 19, 2006, SEC File No. 1-10435).

Exhibit 10.18 Retention and Consultation Agreement, dated December 4,

2007, by and between Sturm, Ruger & Company, Inc. and Robert R. Stutler.

Exhibit 10.19 Credit Agreement, dated as of December 14, 2007, by and

between the Company and Bank of America (Incorporated by reference to Exhibit 10.18 to the Company's Current Report on Form 8-K filed with the SEC on December 20, 2007).


between the Company and Michael O. Fifer (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).


between the Company and Thomas A. Dineen (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).


between the Company and Mark T. Lang (Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).


between the Company and Christopher J. Killoy (Incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).


between the Company and Steven M. Maynard (Incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

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between the Company and Thomas P. Sullivan (Incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).


between the Company and Leslie M. Gasper (Incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).

Exhibit 10.27 Agreement, dated as of April 10, 2008, by and between the

Company and Stephen L. Sanetti (Incorporated by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K/A filed with the SEC on April 30, 2008).

Exhibit 10.28 Severance Agreement, dated as of May 2, 2008 by and between

the Company and Kevin B. Reid, Sr. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on May 5, 2008).

Exhibit 10.29 First Amendment to Credit Agreement, dated as of December

15, 2008, by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on December 22, 2008).

Exhibit 10.30 Second Amendment to Credit Agreement, dated December 11, 2009, by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on December 21, 2009).

Exhibit 10.31 Fifth Amendment to Credit Agreement, dated February 14, 2013 by and between the Company and Bank of America (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on February 21, 2013).

Exhibit 23.1 Consent of McGladrey LLP 86

Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act.

87

Exhibit 31.2 Certification of Treasurer and Chief Financial Officer Pursuant

to Rule 13a-14(a) of the Exchange Act.

89

Exhibit 32.1 Certification of the Chief Executive Officer Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

91

83


Exhibit 32.2 Certification of the Treasurer and Chief Financial Officer

Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

92

Exhibit 99.1 Item 1 LEGAL PROCEEDINGS from the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 1999, SEC File No. 1-10435, incorporated by reference in Item 3 LEGAL PROCEEDINGS.


Form 10-Q of the Company for the quarter ended June 30, 2012, SEC File No. 1-10435, incorporated by reference in Item 3 LEGAL PROCEEDINGS.

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YEAR ENDED DECEMBER 31, 2012

STURM, RUGER & COMPANY, INC.

ITEMS 15(a) FINANCIAL STATEMENT SCHEDULE

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Item 15(a)--Financial Statement Schedule

Schedule II—Valuation and Qualifying Accounts

(In Thousands) COL. A COL. B COL. C COL. D COL. E ADDITIONS Description

Balance at Beginning of Period

(1)

Charged (Credited) to

Costs and Expenses

(2) Charged to

Other Accounts –Describe

Deductions

Balance at End

of Period

Deductions from asset accounts:

Allowance for doubtful accounts: Year ended December 31, 2012 $ 185 $ 115 $ 300 Year ended December 31, 2011 $ 277 $ 92 (a) $ 185 Year ended December 31, 2010 $ 209 $ 68 $ 277

Allowance for discounts:

Year ended December 31, 2012 $ 807 $10,679 $10,661 (b) $ 825 Year ended December 31, 2011 $ 627 $ 6,148 $ 5,968 (b) $ 807 Year ended December 31, 2010 $ 492 $ 5,520 $ 5,385 (b) $ 627

Excess and obsolete inventory

reserve:

Year ended December 31, 2012 $1,311 $ 761 $ 343 (c) $1,729 Year ended December 31, 2011 $1,545 $ (234) $ 0 (c) $1,311 Year ended December 31, 2010 $2,727 $(1,057) $ 125 (c) $1,545

(a) Accounts written off (b) Discounts taken (c) Inventory written off

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Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to incorporation by reference in the Registration Statements (Nos. 333-84677 and

333-53234) on Form S-8 of Sturm, Ruger & Company, Inc. of our reports dated February 27,

2013 relating to our audits of the financial statements, the financial statement schedule, and

internal control over financial reporting, which appear in this Annual Report on Form 10-K of

Sturm, Ruger & Company, Inc. for the year ended December 31, 2012.

/s/ McGladrey LLP

Stamford, Connecticut February 27, 2013

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EXHIBIT 31.1

CERTIFICATION

I, Michael O. Fifer, certify that:

1. I have reviewed this Annual Report on Form 10-K (the “Report”) of Sturm, Ruger &

Company, Inc. (the “Registrant”);

2. Based on my knowledge, this Report does not contain any untrue statement of a

material fact or omit to state a material fact necessary to make the statements made, in

light of the circumstances under which such statements were made, not misleading with

respect to the period covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information

included in this Report, fairly present in all material respects, the financial condition,

results of operations and cash flows of the Registrant as of, and for, the periods

presented in this Report;

4. The Registrant’s other certifying officer and I are responsible for establishing and

maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-

15(e) and 15d-15(e)) and internal control over financial reporting (as defined in

Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure

controls and procedures to be designed under our supervision, to ensure that

material information relating to the Registrant, including its consolidated

subsidiaries, is made known to us by others within those entities, particularly

during the period in which this Report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal

control over financial reporting to be designed under our supervision, to provide

reasonable assurance regarding the reliability of financial reporting and the

preparation of financial statements for external purposes in accordance with

generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures

and presented in this Report our conclusions about the effectiveness of the

disclosure controls and procedures, as of the end of the period covered by this

Report based on such evaluation; and

d) Disclosed in this Report any change in the Registrant’s internal control over

financial reporting that occurred during the Registrant’s most recent fiscal quarter

(the Registrant’s fourth fiscal quarter in the case of an annual report) that has

materially affected, or is reasonably likely to materially affect, the Registrant’s


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5. The Registrant’s other certifying officer and I have disclosed, based on our most recent

evaluation of internal control over financial reporting, to the Registrant’s auditors and

the audit committee of Registrant’s board of directors (or persons performing the

equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of

internal control over financial reporting which are reasonably likely to adversely

affect the Registrant’s ability to record, process, summarize and report financial

information; and

b) Any fraud, whether or not material, that involves management or other employees

who have a significant role in the Registrant’s internal control over financial

reporting.

Date: February 27, 2013

S/MICHAEL O. FIFER

Michael O. Fifer

Chief Executive Officer

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EXHIBIT 31.2

CERTIFICATION

I, Thomas A. Dineen, certify that:

1. I have reviewed this Annual Report on Form 10-K (the “Report”) of Sturm, Ruger &

Company, Inc. (the “Registrant”);

2. Based on my knowledge, this Report does not contain any untrue statement of a

material fact or omit to state a material fact necessary to make the statements made, in

light of the circumstances under which such statements were made, not misleading with

respect to the period covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information

included in this Report, fairly present in all material respects, the financial condition,

results of operations and cash flows of the Registrant as of, and for, the periods

presented in this Report;

4. The Registrant’s other certifying officer and I are responsible for establishing and

maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-

15(e) and 15d-15(e)) and internal control over financial reporting (as defined in

Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure

controls and procedures to be designed under our supervision, to ensure that

material information relating to the Registrant, including its consolidated

subsidiaries, is made known to us by others within those entities, particularly

during the period in which this Report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal

control over financial reporting to be designed under our supervision, to provide

reasonable assurance regarding the reliability of financial reporting and the

preparation of financial statements for external purposes in accordance with

generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures

and presented in this Report our conclusions about the effectiveness of the

disclosure controls and procedures, as of the end of the period covered by this

Report based on such evaluation; and

d) Disclosed in this Report any change in the Registrant’s internal control over

financial reporting that occurred during the Registrant’s most recent fiscal quarter

(the Registrant’s fourth fiscal quarter in the case of an annual report) that has

materially affected, or is reasonably likely to materially affect, the Registrant’s


90

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent

evaluation of internal control over financial reporting, to the Registrant’s auditors and

the audit committee of Registrant’s board of directors (or persons performing the

equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of

internal control over financial reporting which are reasonably likely to adversely

affect the Registrant’s ability to record, process, summarize and report financial

information; and

b) Any fraud, whether or not material, that involves management or other employees

who have a significant role in the Registrant’s internal control over financial

reporting.

Date: February 27, 2013

S/THOMAS A. DINEEN

Thomas A. Dineen

Vice President, Treasurer and

Chief Financial Officer

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EXHIBIT 32.1

Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of Sturm, Ruger & Company, Inc. (the

“Company”) for the period ended December 31, 2012, as filed with the Securities and Exchange

Commission on the date hereof (the “Report”), I, Michael O. Fifer, hereby certify, pursuant to 18

U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that,

to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respect, the

financial condition and results of operations of the Company. Date: February 27, 2013 S/MICHAEL O. FIFER Michael O. Fifer Chief Executive Officer A signed original of this statement has been provided to the Company and will be retained by the

Company and furnished to the Securities and Exchange Commission or its staff upon request.

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EXHIBIT 32.2

Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of Sturm, Ruger & Company, Inc. (the

“Company”) for the period ended December 31, 2012, as filed with the Securities and Exchange

Commission on the date hereof (the “Report”), I, Thomas A. Dineen, hereby certify, pursuant to

18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,

that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respect, the

financial condition and results of operations of the Company. Date: February 27, 2013 S/THOMAS A. DINEEN Thomas A. Dineen Vice President, Treasurer and Chief Financial Officer

A signed original of this statement has been provided to the Company and will be retained by the

Company and furnished to the Securities and Exchange Commission or its staff upon request.

Documents

STURM, RUGER & COMPANY, INC. · Sturm, Ruger & Company, Inc. (the “Company”) is principally engaged in the design, manufacture, and sale of firearms to domestic customers. Approximately